WAR  REVENUE 


AND 


INCOME  TAX 

GUIDE 


BUASH.  HENDERSON 

erf  the  Illinois  Bar 


SECOND  EDITION 


War  Revenue 

and 

Income  Tax  Guide 

for 

1915 


Second  Edition 

Price    $1.50 

(Copyrighted  1914) 


ELIAS  H.  HENDERSON 

Attorney  and  Counselor 

First   National    Bank    Building 

Chicago,  Illinois 


Table  of  Contents 

CHAPTER  I 
War  Revenue  Law 


Treasury  Decisions  

War  Revenue  Law,  annotated 


Page 
,63-69 
,  1-63 


ADDITIONAL    SPECIAL   TAXES    IMPOSED    BY   THE    ACT    OF 

OCTOBER  22,  1914,  TAKING  EFFECT  NOVEMBER 

1,  1914,  TO  CONTINUE  TO  JANUARY  1,  1916. 

Rate  of     Page 
Tax 

Bankers,  for  each  $1,000  of  capital  employed $  1.00         7-11 

Brokers  who  have  not  paid  as  bankers 30.00             13 

Pawnbrokers    50.00             12 

Commercial  brokers 20.00             13 

Customhouse  brokers    10.00             14 

Commission  merchants  who  have  not  paid  as  commercial 

brokers  20.00            13 

Proprietors  of  theaters,  museums,  and  concert  halls: 

Seating  capacity  not  over   250 25.00 

Seating  capacity  over  250  and  not  exceeding  500...  50.00 

Seating  capacity  over  500  and  not  exceeding  800...  75.00 

Seating  capacity  over  800   100.00 

Proprietors  of  circuses 100.00             16 

Proprietors  or  agents  of  other  exhibitions  -or  shows  for 

money 10.00             16 

Proprietors   of   bowling   alleys    and    billiard    rooms,    for 

each  alley  or  table 5.00             16 

Dealers  in  leaf  tobacco  (annual  sales  of  1,000  pounds  or 

less  exempt) :  18 

Sales  not  over  50,000  pounds 6.00 

Sales  over  50,000  and  not  over  100,000  pounds 12.00 

Sales  over  100,000  pounds 24.00 

Dealers  in  tobacco  (manufactured  touacco,  snuff,  cigars, 
and  cigarettes)  exempt  when  annmi  receipts  are  not 

over  $200   -;•-.- •••  4-80             19 

Manufacturers .  ^f  toba.c' ,o :  19 

Sales  not  over  100,000  pounds 6.00 

Sales  over       100,000  and  not  over       200,000  pounds.  12.00 

Sales  over       200,000  and  not  over       400,000  pounds.  24.00 

Sales  over       400,000  and  not  over    1,000,000  pounds.  60.00 

Sales  over    1,000,000  and  not  over    5,000,000  pounds.  300.00 

Sales  over    5,000,000  and  not  over  10,000,000  pounds.  600.00 

Sales  over  10,000,000  and  not  over  20,000,000  pounds.  1,200.00 

Sales  o,ver  20,000,000  pounds 2,496.00 

Manufacture  of  cigars: 

Annual  sales  not  over  100,000  cigars 3.00             19 

Annual    sales    exceed    100,000    and    do    not    exceed 

200,000  cigars •-.-.  6.00 

Annual    sales    exceed    200,000    and    do    not    exceed 

400,000  cigars 12.00 


TREASURY  DECISIONS 

Rate  of     Page 

Tax 
Annual    sales    exceed    400,000    and     d<J     notv;£xeegd  ;:,::. 

1,000,000  cigars   .."....,...,...............,..,..,. 

Annual    sales   exceed    1-,000,00()    and    do . not    exceed 

5,000,000  cigars'  ..............  ? 150,00 -. 

Annual    sales    exceed    5,000,000    and    do    not    exceed. 

20,000,000  cigars .. ,       600.00 

Annual  sales  exceed  20,000,000     and   do  not   exceed 

40,000,000  cigars    ...... 1,200.00 

Annual   sales   exceed  40,000,000   cigars ....2,496.00 

Manufacturers  of  cigarettes: 

Manufacturers    whose    annual    sales    do    not    exceed 

1,000,000  cigarettes 12.00  20 

Annual   sales    exceed    1,000,000    and    do    not    exceed 

2,000,000  cigarettes  ......  .......  ......  ..        24.00 

Annual    sales    exceed    2,000,000    and    do    not    exceed 

5,000,000  cigarettes 60.00 

Annual    sales    exceed    5>000,000    and    do    not    exceed 

10,000,000  cigarettes ...       120.00 

Annual   sales    exceed    10,000,000   and    do    not    exceed 

50,000,000  cigarettes 600.00 

•Annual   sales   exceed   50,000,000   and   do   not   exceed 

100,000,000  cigarettes 1,200.00 

Annual  sales  exceed  100,000,000  cigarettes ...........    2,496.00 

Distilled   Spirits   (Act  of   Oct.  22,   1914). 

Grape  brandy  or  wine  spirits  used  in  the  fortification  of 

sweet  wines  (to  be  assessed),  per  gallon $0.55  .    3 

Fermented  Liquors  (Act  of  Oct.  22,  1914). 

Fermented  liquors,  per  barrel,  containing  not  more  than 

31   gallons    .  .  . .        $1.50  1 

(And  at  a  proportionate  rate  for  any  other  quantity  or 
for  fractional  parts  of  a  barrel  authorized  by  law.) 

Wines,  Liqueurs,  Cordials,  Etc.,  Domestic  and  Imported.  (Act  of  Oct. 

22,  1914.)  1 

Still  wines,  per  pint. .. $0.01               2 

(In  bottles  containing  less  than  pint  in  proportion.) 

Per  quart .02 

Per  gallon .08 

Champagne    and    other    sparkling    wines    and    artificially 

carbonated  wines,  per  V-2  pint  or  less .05               3 

More  than  l/2  pint  and  not  more  than  1  pint .10 

More  than  1  pint  and  not  more  than  1  quart... .20 

(Larger    quantities    same    rate) 

Liqueurs,  cordials,  and  similar  compounds,  per  l/2  pint..  .01^2          .  .1 

More  than  %  pint  and  not  more  than  1  pint. .......  .03 

More  than  1  pint  and  not  more  than  1  quart .  .06 

Larger  containers,  per  gallon   ..-..- .24 

STAMP  TAXES  ON  AND  AFTER  DECEMBER  1,  1914,  TO   CON- 
TINUE TO  JANUARY  1,  1916. 
Schedule  A. — Documentary. 

Bonds,  debentures,  or  certificates  of  indebtedness  of.  any  ' 
association,  company,  or-  corporation,  on  each  $100  of 
face  value  or  fraction  thereof. /    $0.05',          -  33 

On  each  original  issue  of  certificates  of  stock,  whether 
on  organization  or  reorganization,  on  each  $100  of  face 
value  or  fraction  thereof..  . •.•••. .05  3:> 

:On  all  sales,  agreements t to  , sell,  memoranda  of  sales,  d«-  - 
liveries  or  transfers  of  snares,  or  certificates  of  stock 
of  any  association  or  corporation,  on  each  $100  of  face 

"  value  TW  fraction  thereof. .  .02  34 


314006 


WAR   REVENUE   LAW 

Rate  of    Page 
Tax 

Upon  each  sale,  agreement  to  sell,  or  agreement  of  sale 
of  any  products  or  merchandise  at  any  exchange  or 
board  of  trade,  or  other  similar  place,  either  for  pres- 
ent or  future  delivery,  for  each  $100  in  value  of  said 
sale  01  36 

And  for  each  $100  or  fractional  part  thereof  in  excess 
of  $100 .01 

Promissory  notes,  and  for  each  renewal,  for  a  sum  not 

exceeding  $100  .02  47 

For  each  additional  $100  or  fraction  thereof .02 

Bills  of  lading,  manifests,  etc.,  issued  by  express  com- 
panies or  public  carriers,  etc .01 

Bonds,  except  those  required  in  legal  proceedings .50  44 

Certificates  of  profits  or  certificates  or  memoranda  show- 
ing interest  in  the  property  or  accumulations  of  any 
association,  company,  or  corporation,  and  all  transfers 
thereof,  on  each  $100  of  face  value  or  fraction  thereof  .02  45 

Certificate  of  damage  or  otherwise  and  all  other  certifi- 
cates or  documents  issued  by  port  warden  or  marine 
surveyor .25  46 

Certificates    of    any    description    required    by    law,    not 

otherwise  specified  .10  46 

Contract:  Broker's  note,  or  memorandum  of  sale  of 
goods,  or  merchandise,  stocks,  bonds,  exchange,  notes 
of  hand,  real  estate,  or  property  of  any  kind,  issued 
by  brokers,  etc.,  for  each  note  or  memorandum  of  sale 
not  otherwise  provided  for  in  act .10  48 

Conveyance:  Deed,  instrument,  or  writing  conveying 
lands,  tenements,  or  other  realty,  etc.,  value  over  $100 
and  not  exceeding  $500 .50  48 

For  each  additional  $500  or  fraction  thereof .50 

Entry  of  goods,  wares,  or  merchandise  in  customhouse, 

not  exceeding  $100  in  value .25  50 

Exceeding  $100  and  not  exceeding  $500 .50 

Exceeding  $500  in  value 1.00 

Entry  for  withdrawal  of  goods  or  merchandise  from 
customs  bonded  warehouse .50  50 

Insurance,  marine,  inland,  and  fire  (except  purely  co- 
operative or  mutual),  lightning  or  other  peril,  on  each 
policy,  or  renewal  on  amount  of  premium  charged  on 
each  $1  or  fractional  part .OOJ/2  51 

Insurance,  fidelity,  and  guarantee  on  each  policy,  on  each 
$1  or  fractional  part  thereof  of  premium  received .00^  52 

Passage  tickets  by  any  vessel  from  the  United  States  to 
a  foreign  port,  costing  not  exceeding  $30  (tickets  cost- 
ing $10  or  less  exempt) 1.00  53 

More  than  $30  and  not  exceeding  $60 3.00 

More  than  $60 5.00 

Power  of  attorney  or  proxy  for  voting  at  an  election  of 
officers  of  any  incorporated  company  or  association, 
except  religious,  charitable,  literary  societies,  or  public 
cemeteries .10  53 

Power  of  attorney  to  sell  or  convey  real  estate  or  to 
rent  or  lease  the  same,  to  collect  or  receive  rent,  to 
sell  or  transfer  stock,  bonds,  etc .25  53 

(Papers  used  in  the  collection  of  pension,  back  pay,  or 
bounty  claims,  or  claims  for  property  lost  in  military 
or  naval  service  are  exempt) 54 

Protest:  Upon  the  protest  of  every  note,  bill  of  ex- 
change, acceptance,  check,  or  draft,  or  any  marine  pro- 
test    .25  54 


TREASURY  DECISIONS 

Rate  of    Page 
Tax 

Telegraph  and  telephone  messages:  Every  person,  firm, 
or  corporation  operating  any  telegraph  or  telephone 
line  or  lines  is  required  to  make  a  sworn  statement 
to  the  collector  of  the  number  of  messages  or  conver- 
sations transmitted  over  their  lines  during  preceding 
month  for  which  a  charge  of  15  cents  or  more  was 
imposed,  and  for  each  of  such  messages  or  conver- 
sations to  pay  a  tax  of .01  41 

On  seats  in  palace  or  parlor  cars  and  berths  in  sleeping 
cars  (to  be  paid  by  the  company  selling  the  same) . . .  .01  54 

Schedule  B. — In  Effect  December  1,  1914. 
Perfumery  and  cosmetics  and  other  similar  articles: 
For  and  upon  every  packet,  box,  bottle,  pot,  or  phial, 
etc.,   where    such    packet,   box,    bottle,   pot,   phial, 
and   contents   shall    not   exceed   retail    price    of   5 

cents , $0.00^ 

When   retail   price    exceeds    5    cents   and    does    not 

exceed  10  cents .00^4 

When   retail   price   exceeds   10   cents   and   does   not 

exceed  15  cents .00^ 

When   retail   price   exceeds   15   cents   and    does   not 

exceed  25  cents  

And  for  each  additional  25  cents  of  retail  price  or 
value  or  fractional  part  thereof  in  excess  of  25 

cents 

Chewing  gum  or  substitutes  therefor: 

For  and  upon  each  box,  par,  or  package  containing 
chewing  gum,  when  the  retail  value  does  not  ex- 
ceed $1 .04  56 

If  exceeding  $1,  for  each  additional  dollar  or  frac- 
tional part  thereof .04 

Note. — The  act  of  August  18,  1914,  known  as 
the  "United  States  Cotton  Futures  Act,"  in  effect 
February  18,  1915,  imposes  a  tax  on  contracts  of 
sale  of  cotton  for  future  delivery  made  on  any  ex- 
change, board  of  trade,  or  similar  institution  or 
place  of  business,  of  2  cents  for  each  pound  of  cot- 
ton involved,  to  be  paid  by  means  of  stamps  to  be 
affixed  to  the  contract  or  to  the  memoranda  evi- 
dencing the  same. 

The  collection  of  the  tax  devolves  on  the  Com- 
missioner of  Internal  Revenue  under  regulation  of 
the  Secretary  of  the  Treasury. 

Rate  of  Tax 
after  July 

TAXES  IN  EFFECT.  1,  1910. 

Tobacco  and  Snuff. 

Tobacco,  however  prepared,  manufactured  and  sold,  or 

removed  for  consumption  or  sale,  per  pound $0.08 

Snuff,  however  prepared,  manufactured  and  sold,  or  re- 
moved for  consumption  or  sale,  per  pound .08 

Rate  of  Tax 
per  Thou- 
sand after 

Cigars  and  Cigarettes.  July   1, 1910. 

Cigars  of  all  descriptions  made  of  tobacco,  or  any  substi- 
tute therefor,  and  weighing  more  than  3  pounds  per 

thousand $3.00 

Cigars  of  all  descriptions  made  of  tobacco,  or  any  substi- 
tute therefor,  and  weighing  not  more  than  3  pounds 
per  thousand .75 


WAR    REVENUE   LAW 

,        :„  Rate  of    Page 

Tax 

Cigarettes  weighing  not  more  than  3  pounds  per  thou- 
sand   _..,.... ., 1.25 

Cigarettes  weighing  more  than  3  pounds  per  thousand.,          3.60 

Distilled  Spirits,  Etc. 

Distilled    spirits,    per    gallon    , $1.10 

Stamps  for  distilled'  spirits  intended  for  export,  each..  .10 

Except  when  affixed  to  packages  containing  two  or 

more  5-gallpn  cans  for  export   .05 

Case  stamps  for  spirits  bottled  in  bond   . .10 

Wines,  liquors, --or  compounds  known  or  denominated  as 
wine,  and  made  in  imitation  of  sparkling  wine  or 
champagne,  but  not  made  from  grapes  grown  in  the 
United  States,  and  liquors  not  made  from  grapes, 
currants,  rhubarb,  or  berries  grown  in  the  United 
States,  but  produced  by  being  rectified  or  rhixed  with 
distilled  spirits  or  by  infusion  of  any  matter  in  spir- 
its, to  be  sold  as  wine,  or  as  a  substitute  for  wine, 
in  bottles  containing  not  more  than  1  pint  per  bottle 

or  package  .,.-...>. .10 

Same,  in  bottles  containing  more   than   1  pint,   and   not 

more  than  1  quart,  per  bottle -or  package .20 

(And  at  the  same  rate  for  any  larger  quantity  of 
such  merchandise,  however  put  up  or  whatever 
riiay  be  the  package.) 

MISCELLANEOUS   TAXES   NOT   PAYABLE   BY    STAMP. 

Circulation  issued  by  .any  .bank,  etc.,  or  person  (ex- 
cept at  national  bank  taxed  under  sec.  5214,  Rev. 
Stat.,:and  sec.  .13,  .act  of  .Mar.  14,  1900),  per 
month . ......  1/12  of  1  p.  c. 

Circulation  (except  ^national  banks)  exceeding  90 
per  cent  of  capital,  in  addition,  per  month. .....  .1/6  of  p.  c. 

Banks,  etc.,  on.  -arn-ount  of  notes  of -;  any  person, 
State  bank,  or  State-banking -association,  used 
for  circulation  and  paid  out  ..................  10  per  cent. 

Banks,  etc.,  bankers,;  OF  -associations,  on  amount  of 
notes  of  any  .town,  city,  or  municipal  corpora- 
tion paid  out  by  them 10  per  cent. 

Every  person,  firm;  association^,  other    than     na- 
tional-banking- associations,  and   every   corpora- 
tion, State  bank,  or  State-banking  association,  on  ". 
the  amount  of  their  own  notes  used  for  circula- 
tion and  paid  out  by  them 10  per  cent. 

Every  sucfr  person,  firm,  association,  corporation, 
St^fe   bMiKj;-  or   State-banking    association,     and 
also^very  national-banking^  association,  on  'the 
amount  of  notes   of  any;  person,-  firm,   associa- 
tion, other  than  a  .national-banking  association.,, 
or  of  -.any-  corp6ra"tio.n».^ita"te,bahk,.or.Stat^-bank:- ' 
ing  association,  'or  ."oKaiiy  .t6ww.,.,"city;  or  munici- 
pal corporation;  usedt  For. 'circulation  .and    -paid    .     ..    ."."_- 
Qut^h^  thejra  ........  i  .....................  r. ...   10  per  cent. 

Special  Taxes. 

Re£ti}iens  ;6f:  less  than  500  barrels  a  year ... $100.00 

Rectifier's   of  500  barrels  or  more  a  year 200.00 

Wholesale  liquor 'dealers  .:.'........!.......  .  .  ..........  100.00 

Retail  liquor  dealers   . .  ...  .  . ...  . . ... 25.00 

Wholesale  dealers  in  malt  liquors 50.00 

Retail  dealers  in  malt  liquors  . .  . .  .  .  .  . 20.00 

Manufacturers  b-f-'Sttlts  i  .--  ; .  .  v , ; ... .-.:... .', ...,  }.^. .  .~..~.  . . .:  50.00     ; 

And"  for  stills  or  worms  manufactured,  each 1; 


TREASURY  DECISIONS 


Brewers: 

Annual  manufacture  less  than  500  barrels 

Annual  manufacture  500  barrels  or  more 

Manufacturers  of  filled  cheese   

Wholesale  dealers  in  filled  cheese  

Retail  dealers  in  filled  cheese  

Manufacturers    of   oleomargarine    

Wholesale  dealers  in  oleomargarine  artificially  colored  in 
imitation  of  butter 

Wholesale   dealers   in   oleomargarine  free   from  artificial 
coloration  

Retail    dealers    in    oleomargarine    artificially    colored    in 
imitation  of  butter 

Retail  dealers  in  oleomargarine  free  from  artificial  color- 
ation  

Manufacturers  of  adulterated  butter  

Wholesale  dealers  in  adulterated  butter - 

Retail  dealers  in  adulterated  butter   

Manufacturers  of  process  of  renovated  butter 

Manufacturers,  packers,  or  repackers  of  mixed  flour 

Oleomargarine. 

Oleomargarine,  domestic,  artificially  colored  to  look 
like  butter,  of  any  shade  of  yellow,  per  pound.... 

Oleomargarine,  free  from  coloration  that  causes  it  to 
look  like  butter,  of  any  shade  of  yellow,  per  pound. . 

Oleomargarine,  imported  from  foreign  countries,  per 
pound  

Adulterated  Butter,  and  Process  or  Renovated  Butter. 

Adulterated    butter,    per    pound    

Process  or  renovated  butter,  per  pound 

Filled  Cheese. 


Rate  of 
Tax 

50.00 
100.00 
400.00 
250.00 

12.00 
600.00 

480.00 

200.00 

48.00 

6.00 

600.00 

480.00 

48.00 

50.00 

12.00 


$0.10 
.00^ 
.15 

$0.10 

.00^4 

$0.01 
.08 


Page 


Filled  cheese,  per  pound 
Same,  imported,  per  pound 

Mixed   Flour. 

Mixed  flour,  per  barrel  of  196  pounds,  or  more  than  98 

pounds  $0.04 

Half  barrel  of  98  pounds,  or  more  than  49  pounds..  ..  .02 

Quarter  barrel  of  49  pounds,  or  more  than  24^2  pounds  .01 

Eighth  barrel  of  241/^>  pounds  or  less .00^ 

(Mixed  flour  imported  from  foreign  countries,  in  addi- 
tion to  import  duties,  must  pay  internal-revenue  tax 
as  above.) 

Opium. 
Opium  manufactured  for  smoking  purposes,  per  pound..    $300.00 

Playing  Cards. 

Playing  cards,  per  pack,   containing  not   more   than   54 
cards   . 


White  Phosphorus  Matches. 

White  phosphorus  matches,  per  hundred 

(Rate  of  tax  after  Jan.  1,  1915.) 


$0.02 


$0.02 


CHAPTER  II 
Income  Tax 


Income  Tax  Law,  annotated   43-  63 

Questions  and  Answers    3-  32 

Syllabus   of   Income   Tax   Law    35-  42 

Treasury   Department   Forms  and   Certificates. ..  .65-  96 
Treasury    Department    Regulations,    1913 99-159 


Treasury  Decisions,  1914 

Page 
Aliens,  individuals — 

Exemption (T.  D.  2012) 108 

Non-resident    (T.  D.  2013) 109 

Bonds — 

Foreign  corporations    (T.  D.  1992)  .... 99 

Property  of  aliens,  exempt (T.  D.  2017) 117 

Tax-free  covenant  clause (T.  D.  1942-1948) 73-79 

Certificates — 

Co-operative  Dairies,  etc.,  not 

exempted    (T.  D.  1996)  ....          102 

Exemption,  firms  and  organizations . .  (T.  D.  1998)  ....          103 

Monthly  list,  return  of (T.  D.  1973) 86 

.Ownership    (T.  D.  1974) 87 

'Ownership  executed  by  foreign  banks(T.  D.  1977)  ....          93 

Ownership    Bonds,    foreign    (T.  D.  1988) 97 

Ownership,  Revised  forms    (T.  D.  1976) 88-93 

Substitute,    1059    (T.  D.  1986) 95 

Waiver  of  filling  in  number  of  bonds .  (T.  D.  2022) 118 

Corporations — 

Annual  net  income   (T.  D.  2001) 104 

Foreign,   Fiscal  agents    (T.  D.  2006) 107 

Insurance — 

Commissions  on  renewal  premiums . .  (T.  D.  2011)  .... 108 

Dividends  on  Net  Earnings — 

Excluded  as  income,^  when (T.  D.  1945-1947) 77-78 

Deductions — 

Corporations,  capital  stock    (T.  D.  1960) 56 

Expense    (T.  D.  1993) ..100 

Indebtedness    (T.  D.  I960) 82 

Interest  actually  accrued    (T.  D.  I960) 

Losses   (T.  D.  1989-2005) 105 

Depreciation — 

Buildings,  schedule    72 

Exemption — 

Not  claimed  at  source,  returned  on 

Form  1040    (T.  D.  1942) 73 


TREASURY  DECISIONS 

Page 

Fiduciaries- 
Return  to  be  made  on  Form  1041 (T.  D.  1943) 73 

Forms — 

1044  Revised    (T.  D.  1973) 86 

Partnerships    (T.  D.  1957) 81 

Certificate  No.  1065   110 

Penalties — 

Compromise  of (T.  D.  2015) 114 

Returns — 

Confidential    (T.  D.  1962) 84 

Extension  of  time  for  filing (T.  D.  1953) 81 

Inspection  of (T.  D.  2016) 1 14 

Monthly   lists    (T.  D.  1997) 102 

Penalties   (T.  D.  1950) 79 

Time  for  filing   (T.  D.  1950)  .... 

Stamp,  indorsement  on  foreign  coupons. .  (T.  D.  2023)  ....         . . .  .118 

State — 

Political  subdivision  of 

Special  assessment   districts    (T.  D.  1946)  . . 77 

Tax- 
Advance  payment  of  withheld  by 

agents,    etc (T.  D.  1965)  . . 77 

Constitutionality     (T.  D.  1983) 94 

Organizations    (T.  D.  1967) 85 

Withholding  agents    (T.  D.  1967) 


WAR    REVENUE    LAW 

(T,  D.  2026.) 

Fermented  liquors — Additional  tax  on  liquors  on  storage,  and 
increase  in  rate  of  tax  under  act  of  October  22,  1914. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  October  24,  19(4, 
To  collectors  of  internal  revenue  and  others  concerned: 

The  act  approved  October  22,  1914,  imposes  a  tax  of  $1.50  a 
barrel  on  fermented  liquors,  and  provides  for  the  assessment  and 
collection  of  the  additional  tax  at  the  rate  of  50  cents  a  barrel  on 
all  fermented  liquors  removed  from  the  brewery  premises  prior  to 
the  date  when  the  act  took  effect  and  which  on  that  date  were 
stored  in  warehouse,  and  to  which  a  stamp  denoting  the  tax  at 
the  rate  of  $1  per  barrel  had  been  affixed  at  the  time  of  removal. 
This  provision  for  additional  tax  on  beer  stored  in  warehouse  is 
held  to  apply  to  all  fermented  liquors  in  the  possession  of  brew- 
ers or  their  agents,  whether  contained  in  ordinary  packages  or  in 
bottles,  when  the  act  took  effect.  For  the  purpose  of  assessing 
and  collecting  such  additional  tax,  every  brewer  or  agent  of  a 
brewer  having  stored  in  warehouse  any  fermented  liquors  which 
had  been  removed  from  the  brewery  where  produced  prior  to 
October  23,  1914,  bearing  the  proper  stamp  at  the  rate  of  $1  per 
barrel  shall  make  and  render  to  the  collector  of  the  district  a 
return  in  duplicate,  under  oath,  on  Form  417,  Revised  October 
23,  1914,  of  the  quantity  thereof  so  held.  Personal  investigation 
will  be  made  in  each  case  by  a  deputy  collector,  who  will  certify 
to  the  accuracy  of  the  return,  or  if  he  is  not  satisfied  as  to  its 
accuracy,  he  will  so  state,  and  indicate  the  quantity  which  he 
believes  to  be  correct.  In  case  of  substantial  disagreement  be- 
tween the  return  and  the  deputy  collector's  statement  the  collec- 
tor will  make  further  investigation  to  satisfy  himself  as  to  the 
proper  quantity  and  enter  the  same  accordingly  on  his  list, 
Form  23. 

Collectors  will  at  once  furnish  blank  Forms  417  to  each  brewer, 
or  agent  of  a  brewer,  in  their  respective  districts,  and  require  the 
returns  to  be  made  in  accordance  with  the  printed  instructions 
thereon.  The  return  must  show  the  quantity  of  fermented  liquors 
on  hand  on  the  morning  of  October  23,  1914,  before  the  com- 
mencement of  business.  If  any  liquors  subject  to  the  additional 
tax  have  been  removed  in  the  interval  between  that  time  and  the 
time  when  the  return  is  actually  made,  the  quantity  returned  will 
be  the  quantity  of  such  liquors  on  hand  when  the  return  is  made, 
together  with  the  quantity  of  such  liquors  removed  in  the  in- 
terval. 

One  copy  of  the  return  with  the  deputy  collector's  certificate 
is  to  be  filed  in  the  collector's  office,  and  the  other  is  to  be  for- 
warded to  the  Commissioner  of  Internal  Revenue,  and  the  addi- 
tional tax  found  to  be  due  as  shown  by  the  return  will  be  entered 
by  the  collector  on  his  next  list,  Form  23. 

In  making  up  Form  18  for  October,  1914,  brewers  will  show 
separately,  by  interlineation,  the  quantities  of  fermented  liquor 


TREASURY  DECISIONS 

sold  or  removed  for  consumption  or  sale  by  pipe  line  (where  pipe 
lines  exist)  and  by  the  package  for  the  two  portions  of  the  month, 
viz,  the  portion  before  the  23d  and  the  portion  commencing  with 
the  23d.  In  the  stamp  account  on  Form  18  brewers  will  also 
show  separately,  by  interlineation,  the  number  and  kind  of  stamps 
purchased  by  them  at  the  old  and  new  rates,  and  the  number  and 
kind  of  stamps  used  at  the  old  and  new  rates  on  beer  transferred 
by  pipe  line  (where  pipe  lines  exist)  and  by  the  package,  and  also 
the  number  and  kind  of  stamps  at  the  old  and  new  rates  remain- 
ing on  hand  in  their  possession  at  the  close  of  the  month.  Instead 
of  one  return,  Form  18,  for  the  month  of  October,  the  brewer 
may  at  his  option  render  two  returns,  one  for  the  portion  of  the 
month  prior  to  the  23d  and  the  other  for  the  remaining  portion, 
care  being  taken  to  show  in  the  stamp  account  the  number  and 
kind  of  stamps,  at  the  rate  of  $1.50  per  barrel,  purchased,  used, 
and  on  hand.  Brewers  will  also  make  entries  in  the  account  of 
"Stamps  purchased"  on  Record  Form  104  in  such  a  way  as  to 
distinguish  between  those  at  the  rate  of  $1  and  those  at  the  rate 
of  $1.50. 

The  attention  of  collectors  is  called  to  the  fact  that  the  increase 
in  the  rate  of  tax  is  likely  to  make  necessary  the  giving  of  new 
bonds  by  brewers,  in  increased  amounts,  in  order  to  satisfy  the 
requirements  of  section  3336,  Revised  Statutes.  Each  new  bond 
given  on  and  after  December  1,  1914,  will  by  the  terms  of  the 
act,  while  the  same  is  in  force,  require  a  documentary  stamp  of 
the  value  of  50  cents. 

Collectors  will  supply  brewers  and  their  agents  with  copies  of 
this  Circular.  W.  H.  OSBORN, 

Commissioner  of  Internal  Revenue. 

(T.  D.  2027.) 

Domestic  and  imported  wines,  liqueurs,  cordials,  etc. 
Dealers  to  keep  an  account  of  sales  pending  receipt  of  appropriate  tax  stamps. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  October  24,  1914. 
To  collectors  of  internal  revenue  and  others  concerned: 

In  view  of  the  fact  that  the  provisions  of  the  revenue  law,  ap- 
proved October  22,  1914,  relating  to  the  stamp  taxes  imposed  on 
domestic  and  imported  wines,  cordials,  etc.,  went  into  effect  Octo- 
ber 23,  1914,  and  that  appropriate  stamps  for  the  payment  of  such 
taxes  have  not  yet  been  provided,  retail  dealers  in  such  un- 
stamped wines,  and  wholesale  dealers  selling  such  wines  to 
persons  other  than  dealers  must,  until  such  stamps  may  be  pro- 
cured, keep  a  strict  account  of  all  such  unstamped  wines  sold  by 
them  on  and  after  October  23,  1914;  and,  upon  procuring  the 
necessary  stamps,  must  at  once  render  to  the  collector  of  the 
district  a  sworn  statement  of  all  such  sales  made  by  them  and 
must  transmit  with  such  statement  canceled  stamps  showing 
payment  of  tax  on  all  such  wines  so  sold.  The  required  state- 
ment should  be  in  the  following  form : 


WAR   REVENUE   LAW 

Dealers  return  of  sales  of  unstamped  wines  taxable  under  the  revenue  act, 
approved  October  22,  1914. 


Special-Tax  Stamp  No. 

The  undersigned  a  — 
district  of  - 


DISTRICT  OF 


-(2)  liquor  dealer,  doing  business  at 


1914. 

•  in  the 


— ,  on  oath  states  that  the  following  is  a  full  and  true 
account  of  all  unstamped  domestic  and  imported  wines  taxable  under  the  pro- 
visions of  an  act  of  Congress,  approved  October  22,  1914,  sold  by  him  (or 

them)  on  and  after  October  23,  1914,  up  to  and  including  the day  of 

— ,  1914;  and  that  the  attached  canceled  stamps  cover  all  taxes  due  on 
the  unstamped  wines  so  sold. 


Kinds  of  wine. 

Rate  of 
tax  per 
quart. 

Number  of  bottles  or  containers. 

Amount 
of  tax. 

Not  more 
than  one- 
fourth  p't. 

Not  more 
than  one- 
half  pint. 

Not  more 
than  one 
pint. 

Not  more 
than  one 
quart. 

Gal- 
lons.® 

Still  wines  

Cents. 
2 

20 
6 

| 

Champagne  and  other 
sparkling   or  artifi- 
cially      carbonated 
wines   

Liqueurs,  cordials,  or 
other  similar  com- 
pounds   

'  JjT..  J2iu 

•MM 

©  In  bottles  or  containers  not  otherwise  here  designated. 


Subscribed  and  sworn  to  before  me  this 


day  of 


-,  1914. 


Dealer. 


[SEAL.] 


©  "Wholesale"  or  "retail." 

Upon  receipt  of  this  circular,  collectors  will  see  that  a  copy 
thereof  is  at  once  furnished  to  each  wholesale  and  retail  liquor 
dealer  in  their  respective  districts;  and  that  on  receipt  of  the 
dealers'  statements  herein  required,  the  same,  with  the  canceled 
stamps  (in  sealed  envelopes)  securely  attached,  should  be  at  once 
forwarded  to  the  Commissioner  of  Internal  Revenue. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


References  Cited 

Treasury  Decisions T.  D. 

U.  S.  Attorney-General's  Opinions , A.  G.  Op. 

U.  S.  Supreme  Court  Reports .' U.  S. 

Federal  Reporter Fed.  Rep. 


War  Revenue  Law 

An  Act  To  increase  the  internal  revenue,  and  for  other  purposes. 
Approved  October  22,  1914 

Be  it  enacted  by  the  Senate  and  House  of  Representatives  of  the  te?ceandle  other 
United  States  of  America  in  Congress  assembled,  That  there  shall  siini1laru  ferment- 
be  levied,  collected,  and  paid  in  lieu  of  the  tax  of  $1  now  imposed 
by  law,  a  tax  of  $1.50  on  all  beer,  lager  beer,  ale,  porter,  and  other 
similar  fermented  liquor,  brewed  or  manufactured  and  sold,  or 
stored  in  warehouse,  or  removed  for  consumption  or  sale,  within 
the  United  States,  by  whatever  name  such  liquors  may  be  called, 
for  every  barrel  containing  not  more  than  thirty-one  gallons;  and 
at  a  like  rate  for  any  other  quantity  or  for  the  fractional  parts  of  a 
barrel  authorized  and  defined  by  law.  And  section  thirty-three 
hundred  and  thirty-nine  of  the  Revised  Statutes  is  hereby  amended 
accordingly : 

Provided,  That  the  additional  tax  imposed  in  this  section  on  all  anJe^chaanrgeUof 
fermented  liquors  stored  in  warehouse  to  which  a  stamp  has  been  old  stampTfo  be 
affixed  shall  be  assessed  and  collected  in  the  manner  now  provided  ™0ateknew  l?atede" 
by  law  for  the  collection  of  taxes  not  paid  by  stamp : 

Provided  further,  That  until  appropriate  stamps  are  prepared 
and  furnished,  the  stamps  heretofore  used  to  denote  the  payment 
of  the  internal-revenue  tax  on  fermented  liquor  may  be  stamped 
or  imprinted  with  a  suitable  device  to  denote  the  new  rate  of  tax 
herein  imposed,  and  shall  be  affixed  to  all  packages  containing  such 
liquors  on  which  the  tax  imposed  by  this  Act  is  paid.  Any  person 
having  possession  of  unaffixed  stamps  heretofore  issued  for  the 
payment  of  the  tax  on  fermented  liquors  shall  present  the  same  to 
the  collector  of  the  district,  who  shall  receive  them  at  the  price 
paid  for  such  stamps  by  the  purchaser  and  issue  in  lieu  thereof  new 
or  imprinted  stamps  at  the  rate  provided  in  this  Act. 

The  tax  is  on  fermented  liquor  in  the  possession  of  or  stored  by  a 
brewer  and  not  on  that  of  a  wholesale  or  retail  dealer.  22  A.  G.,  Op.  279; 
23  Id.  228. 

SEC.  2.  That  upon  all  still  wines,  domestic  and  imported,  when 
sold  or  offered  for  sale  or  consumption,  there  shall  be  levied  and  ported, 
collected  taxes  as  follows:  On  each  bottle  containing  one-fourth 
pint  or  less,  one-fourth  cent;  on  each  bottle  containing  more  than 
one-fourth  pint  and  not  more  than  one-half  pint,  one-half  cent;  on 
each  bottle  containing  more  than  one-half  pint  and  not  more  than 
one  pint,  1  cent;  and  on  each  bottle  containing  more  than  one  pint 
and  not  more  than  one  quart,  2  cents ;  and  on  still  wines  in  all 
other  containers,  not  herein  specifically  provided  for,  the  tax  shall 
be  at  the  rate  of  8  cents  per  gallon. 


WA-R,  REVENUE.  LAW 


Champagne, 
domestic  and 
imported. 


Each  bottle  or 
container  must 
bear  stamp. 


Retail      dealer 
must  affix  stamp. 


No  stamp  tax 
on  still  wine 
used  by  recti- 
fier, chemist  or 
druggist. 


Stamps  to  be 
prepared  by 
Commissioner  of 
Internal  R  e  v  e- 


Bottle  or  con- 
tainer not  bear- 
ing stamps  shall 
be  forfeited  to 
the  United 
States. 


That  upon  all  domestic  and  imported  champagne  and  other  spar- 
kling wines,  and  upon  all  artificially  carbonated  wines  when  sold 
or  offered  for  sale  or  consumption,  there  shall  be  levied  and  col- 
lected taxes  as  follows :  Upon  each  bottle  containing  one-half  pint 
or  less,  5  cents;  on  each  bottle  containing  more  than  one-half 
pint  and  not  more  than  one  pint,  10  cents ;  on  each  bottle  containing 
more  than  one  pint  and  not  more  than  one  quart,  20  cents ;  and  on 
other  all  containers  at  the  rate  of  20  cents  per  quart;  and  on  all 
liqueurs,  cordials,  or  similar  compounds,  domestic  and  imported,  by 
whatever  name  sold  or  offered  for  sale,  there  shall  be  levied  and 
collected  a  tax  on  each  bottle  containing  not  more  than  one-half 
pint,  \y2  cents;  more  than  one-half  pint  and  not  more  than  one 
pint,  3  cents ;  more  than  one  pint  and  not  more  than  one  quart,  6 
cents;  and  on  larger  containers  a  tax  at  the  rate  of  24  cents  per 
gallon. 

All  of  the  taxes  imposed  in  the  preceding  paragraphs  of  this 
section  shall  be  paid  by  stamps  to  be  affixed  to  each  bottle  or  con- 
tainer in  which  such  still  wines,  champagne  wines,  carbonated  wines, 
liqueurs,  or  cordials,  or  similar  compounds,  are  sold  or  offered  for 
sale: 

Provided,  That  when  such  still  wines,  champagne  wines,  car- 
bonated wines,  liqueurs,  cordials,  or  similar  compounds,  taxable 
under  the  provisions  of  this  section,  are  sold  or  delivered  by  the 
producer,  importer,  or  dealer  in  wholesale  quantities  to  other 
dealers,  including  rectifiers>  manufacturing  chemists,  and  druggists, 
the  dealer  receiving  and  selling,  or  offering  the  same  for  sale  or  con- 
sumption to  any  person  other  than  a  dealer,  shall  affix  thereto  the 
stamps  hereinbefore  prescribed : 

And  provided  further,  That  the  stamp  tax  herein  imposed  shall 
not  be  collected  on  any  still  wine  used  by  any  rectifier,  manufactur- 
ing chemist,  or  druggist  in  the  manufacture  of  any  liqueur,  cordial, 
or  compound  subject  to  any  internal-revenue  tax  imposed  by  this 
Act. 

The  Commissioner  of  Internal  Revenue  shall  cause  to  be  pre- 
pared suitable  and  special  stamps  denoting  the  tax  herein  imposed, 
to  be  affixed  and  canceled  in  such  manner  as  he,  with  the  approval 
of  the  Secretary  of  the  Treasury,  may  prescribe;  and  in  the  ab- 
sence of  such  stamps  from  any  bottle  or  container  containing  wine, 
liqueur,  cordial,  or  compound  taxable  under  the  provisions  of  this 
section,  sold  or  offered  for  sale  or  consumption,  shall  be  prima  facie 
evidence  that  the  tax  thereon  has  not  been  paid,  and  all  such  wines, 
liqueurs,  cordials,  or  compounds  shall  be  forfeited  to  the  United 
States. 

The  existence  of  a  bona  fide  mortgage  on  property  will  not  prevent  it 
being  forfeited  under  this  section.  United  States  v.  246^  Ibs.  of  Tobacco 
103  Fed  Rep.,  791.  United  States  v.  231  patent  machines,  99  Fed.  Rep.,  559. 

The  word  "compounded"  means  mixed  and  does  not  apply  to  the 
chemical  union  of  elements.  United  States  v.  Stubbs,  91  Fed  Rep  608 
L.  Ellwood  Lee  Co.  v.  McCain,  106  Fed.  Rep.,  164. 

There  shall  be  levied  and  assessed  against  the  maker  or  producer 
of  all  wines  fortified  under  the  provisions  and  conforming  to  the 


WAR    REVENUE    LAW 


requirements  of  the  sections  of  the  tariff  Act  of  October  first  eight- 
een hundred  and  ninety,  relating  to  the  fortification  of  pure  sweet 
wines,  as  amended,  and  as  further  amended  by  this  Act,  a  tax  of  55 
cents  on  each  taxable  gallon  of  grape  brandy  or  wine  spirits  used  by 
him  in  the  fortification  of  such  wines : 

Provided,  however,  That  the  maker  or  producer  of  such  fortified 
wines  shall,  under  regulations  and  suitable  bonds,  to  be  prescribed 
by  the  Commissioner  of  Internal  Revenue,  with  the  approval  of  the 
Secretary  of  the  Treasury,  have  assessed  against  him  monthly  the 
said  tax  of  55  cents  on  each  taxable  gallon  of  grape  brandy  or  wine 
spirits  used  by  him  during  the  preceding  month,  which  assessment 
shall  be  paid  within  ninety  days  from  the  date  of  notice  thereof : 

Provided  further,  That  nothing  herein  contained  shall  be  con- 
strued as  exempting  any  still  wines,  cordials,  liqueurs,  or  similar 
compounds  from  the  payment  of  any  stamp  tax  provided  for  in 
this  section. 

The  Commissioner  of  Internal  Revenue,  with  the  approval  of 
the  Secretary  of  the  Treasury,  is  hereby  authorized  to  make  all 
necessary  regulations  to  make  effective  the  provisions  of  this  section. 

That  sections  forty-two,  forty-three,  forty-five,  forty-six  and 
forty-nine  of  the  Act  of  October  first,  eighteen  hundred  and  ninety, 
as  amended  by  section  sixty-eight  of  an  Act  approved  August 
twenty-eighth,  eighteen  hundred  and  ninety-four,  and  by  an  Act  ap- 
proved June  seventh,  nineteen  hundred  and  six,  are  further  amended 
to  read  as  follows : 

"SEC.  42.  That  any  producer  of  pure  sweet  wines  may  use  in  the 
preparation  of  such  sweet  wines,  under  such  regulations,  and  after 
the  filing  of  such  notices  and  bonds,  together  with  the  keeping  of 
such  records  and  the  rendition  of  such  reports  as  to  materials  and 
products  as  the  Commissioner  of  Internal  Revenue,  with  the  ap- 
proval of  the  Secretary  of  the  Treasury,  may  prescribe,  wine  spirits 
produced  by  any  duly  authorized  distiller,  and  the  Commissioner  of 
Internal  Revenue  in  determining  the  liability  of  any  distiller  of  wine 
spirits  to  assessment  under  section  thirty-three  hundred  and  nine  of 
the  Revised  Statutes,  is  authorized  to  allow  such  distiller  credit  in 
his  computations  for  the  wine  spirits  withdrawn  to  be  used  in 
fortifying  sweet  wines  under  this  Act: 

"Provided,  That  such  wine  containing  after  fortification  more 
than  twenty-four  per  centum  of  alcohol,  as  defined  by  section  thirty- 
two  hundred  and  forty-nine  of  the  Revised  Statutes,  shall  be  for- 
feited to  the  United  States. 

"SEC.  43.  That  the  wine  spirits  mentioned  in  section  forty-two 
of  this  Act  is  the  product  resulting  from  the  distillation  of  fer- 
mented grape  juice,  to  which  water  may  have  been  added  prior  to, 
during,  or  after  fermentation,  for  the  sole  purpose  of  facilitating 
the  fermentation  and  economical  distillation  thereof,  and  shall  be 
held  to  include  the  product  from  grapes  or  their  residues  com- 
monly known  as  grape  brandy,  and  shall  include  commercial  grape 
brandy  which  may  have  been  colored  with  burnt  sugar  or  caramel; 
and  the  pure  sweet  wine  which  may  be  fortified  with  wine  spirits 
under  the  provisions  of  this  Act  is  fermented  or  partially  fermented 


Grape,  brandy 
or  wine  spirits 
used  in  fortifi- 
cation of  sweet 
wines  taxed  55 
cents  per  gallon. 


Fortified  still 
wines  not  ex- 
empt from  tax 
provided  in  Sec- 
tion 1  of  this 
Act. 

Commissioner 
of  Internal  Rev- 
enue to  make 
regulation. 


Wine       spirits 
defined. 


WAR   REVENUE   LAW 


Addition    of 

sugar. 


Addition    of 
water. 


grape  juice  only,  with  the  usual  cellar  treatment,  and  shall  contaia 
no  other  substance  whatever  introduced  before,  at  the  time  of,  or 
after  fermentation,  except  as  herein  expressly  provided: 

"Provided,  That  the  addition  of  pure  boiled  or  condensed  grape 
must  or  pure  crystallized  cane  or  beet  sugar,  or  pure  dextrose  sugar 
or  water,  or  any  or  all  of  them,  to  the  pure  grape  juice  before  fer- 
mentation, or  to  the  fermented  product  of  such  grape  juice,  or  to 
both,  prior  to  the  fortification  provided  in  this  Act,  either  for  the 
purpose  of  perfecting  sweet  wines  according  to  commercial  stand- 
ards or  for  mechanical  purposes,  shall  not  be  excluded  by  the  defini- 
tion of  pure  sweet  wine  aforesaid : 

"Provided,  however,  That  the  cane  or  beet  sugar,  or  pure  dext- 
rose sugar  so  used  shall  not  be  in  excess  of  eleven  per  centum  of  the 
weight  of  the  wine  to  be  fortified  under  this  Act: 

"And  provided  further,  That  the  addition  of  water  herein  au- 
thorized shall  be  under  such  regulations  and  limitations  as  the 
Commissioner  of  Internal  Revenue,  with  the  approval  of  the  Secre- 
tary of  the  Treasury,  may  from  time  to  time  prescribe: 

"Provided,  however,  That  records  kept  in  accordance  with  such 
regulations  as  to  the  percentage  of  saccharine,  acid,  alcoholic,  and 
added  water  content  of  the  wine  offered  for  fortification  shall  be 
open  to  inspection  by  any  official  of  the  Department  of  Agriculture 
thereto  duly  authorized  by  the  Secretary  of  Agriculture;  but  in  no 
case  shall  such  wines  to  which  water  has  been  added  be  eligible  for 
fortification  under  the  provisions  of  this  Act,  where  the  same,  after 
fermentation  and  before  fortification,  have  an  alcoholic  strength  of 
less  than  five  per  centum  of  their  volume, 
withdrawal  of  "SEC.  45.  That  under  such  regulations  and  official  supervision, 

wine  spirits  from  ,  .  .  -          ,          ~  .  .     .  ..  rii          i 

bonded  ware-  and  upon  the  execution  of  such  entries  and  the  giving  of  such  bonds, 
ie°y?e  °r  distl1  bills  of  lading,  and  other  security  as  the  Commissioner  of  Internal 
Revenue,  with  the  approval  of  the  Secretary  of  the  Treasury  shall 
prescribe,  any  producer  of  pure  sweet  wines  as  defined  by  this 
Act  may  withdraw  wine  spirits  from  any  special  bonded  warehouse 
in  original  packages  or  from  any  registered  distillery  in  any  quan- 
tity not  less  than  eighty  wine  gallons,  and  may  use  so  much  of  the 
same  as  may  be  required  by  him  under  such  regulations,  and  after 
the  filing  of  such  notices  and  bonds  and  the  keeping  of  such  records 
and  the  rendition  of  such  reports  as  to  materials  and  products  and 
the  disposition  of  the  same  as  the  Commissioner  of  Internal  Revenue, 
with  the  approval  of  the  Secretary  of  the  Treasury,  shall  prescribe, 
in  fortifying  the  pure  sweet  wines  made  by  him,  and  for  no  other 
purpose,  in  accordance  with  the  foregoing  limitations  and  provisions ; 
and  the  Commissioner  of  Internal  Revenue,  with  the  approval  of  the 
Secretary  of  the  Treasury,  is  authorized  whenever  he  shall  deem 
it  to  be  necessary  for  the  prevention  of  violations  of  this  law  to  pre- 
scribe that  wine  spirits  withdrawn  under  this  section  shall  not  be 
used  to  fortify  wines  except  at  a  certain  distance  prescribed  by  him 
from  any  distillery,  rectifying  house,  winery,  or  other  establishment 
used  for  producing  or  storing  distilled  spirits,  or  for  making  or  stor- 
ing wines  other  than  wines  which  are  so  fortified,  and  that  in  the 
building  in  which  such  fortification  of  wines  is  practiced  no  wines  or 

4 


WAR   REVENUE    LAW 

spirits  other  than  those  permitted  by  this  regulation  shall  be  stored 
in  any  room  or  part  of  the  building  in  which  fortification  of  wines  is 
practiced.  The  use  of  wine  spirits  for  the  fortification  of  sweet 
wines  under  this  Act  shall  be  under  the  immediate  supervision  of  an 
officer  of  internal  revenue,  who  shall  make  returns  describing  the  *°™{2J£nt  su' 
kinds  and  quantities  of  wine  so  fortified,  and  shall  affix  such  stamps 
and  seals  to  the  packages  containing  such  wines  as  may  be  prescribed 
by  the  Commissioner  of  Internal  Revenue,  with  the  approval  of  the 
Secretary  of  the  Treasury;  and  the  Commissioner  of  Internal 
Revenue  shall  provide  by  regulations  the  time  within  which  wines  so 
fortified  with  the  wine  spirits  so  withdrawn  may  be  subject  to  in- 
spection, and  for  final  accounting  for  the  use  of  such  wine 
spirits  and  for  rewarehousing,  or  for  payment  of  the  tax  on  any 
portion  of  such  wine  spirits  which  remain  not  used  in  fortifying 
pure  sweet  wines. 

"SEC.  46.  That  wine  spirits  may  be  withdrawn  from  special  wiSdrawnSPfrit? 
bonded  warehouses  at  the  instance  of  any  person  desiring  to  use  the  exportation  ^ex- 
same  to  fortify  any  wines,  in  accordance  with  commercial  demands  e 
of  foreign  markets,  when  such  wines  are  intended  for  exportation, 
without  the  payment  of  tax  on  the  amount  of  wine  spirits  used  in 
such  fortification,  under  such  regulations,  and  after  making  such 
entries,  and  executing  and  filing  with  the  collector  of  the  district 
from  which  the  removal  is  to  be  made  such  bonds  and  bills  of 
lading,  and  giving  such  other  additional  security  to  prevent  the  use 
of  such  wine  spirits  free  of  tax  otherwise  than  in  the  fortification 
of  wine  intended  for  exportation  and  for  the  due  exportation  of 
the  wine  so  fortified,  as  may  be  prescribed  by  the  Commissioner 
of  Internal  Revenue,  with  the  approval  of  the  Secretary  of  the 
Treasury;  and  all  of  the  provisions  of  law  governing  the  exporta- 
tion of  distilled  spirits  free  of  tax,  so  far  as  applicable,  shall  apply 
to  the  withdrawal  and  use  of  wine  spirits  and  the  exportation  of 
the  same  in  accordance  with  this  section ;  and  the  Commissioner  of 
Internal  Revenue  is  authorized,  subject  to  the  approval  of  the  Sec- 
retary of  the  Treasury,  to  prescribe  that  wine  spirits  intended 
for  the  fortification  of  wines  under  this  section  shall  not  be  intro- 
duced into  such  wines  except  under  the  immediate  supervision  of 
an  officer  of  internal  revenue,  who  shall  make  returns  describing 
the  kinds  and  quantities  of  wine  so  fortified,  and  shall  affix  such 
stamps  and  seals  to  the  packages  containing  such  wines  as  may  be 
prescribed  by  the  Commissioner  of  Internal  Revenue,  with  the  ap- 
proval of  the  Secretary  of  the  Treasury.  Whenever  transportation  Transportation, 
of  such  wine  is  to  be  effected  by  land  carriage  the  Commissioner  of 
Internal  Revenue,  with  the  approval  of  the  Secretary  of  the  Treas- 
ury, shall  prescribe  such  regulations  as  to  sealing  packages  and 
vehicles  containing  the  same,  and  as  to  the  supervision  of  trans- 
portation from  the  point  of  departure,  which  point  shall  be  deter- 
mined as  the  place  where  such  wine  spirits  may  be  introduced  into 
such  wines  to  the  point  of  destination  as  may  be  necessary  to  insure 
the  due  exportation  of  such  fortified  wines: 

"Provided,    That  where,  in  accordance  with   regulations  of  the 
Commissioner  of  Internal  Revenue,  with  the  approval  of  the  Sec- 


WAR   REVENUE   LAW 


Refund. 


Recovery       of 
wine    spirits. 


Condition. 


Allowance     or 
refund. 


Gaugers    and 
storekeepers. 


Allowance. 


Bonds. 


retary  of  the  Treasury,  wines  fortified  under  the  provisions  of  this 
Act  with  brandy  taxable  at  55  cents  per  proof  gallon  are  exported 
directly  from  the  winery  where  fortified,  there  shall  be  allowed  an 
abatement  or  refund  of  tax  equivalent  to  55  cents  per  gallon  on 
each  proof  gallon  of  wine  spirits  contained  in  such  wine  at  the  time 
of  exportation,  which  amount  of  wine  spirits  shall  be  ascertained 
by  the  Commissioner  of  Internal  Revenue  under  regulations  ap- 
proved by  the  Secretary  of  the  Treasury : 

"Provided,  That  such  wine  spirits  on  which  abatement  or  refund 
of  tax  is  allowed  shall  not  exceed  the  total  amount  of  alcohol  in 
such  wine  over  and  above  fourteen  per  centum  thereof. 

"SEC.  49.  That  wine  spirits  used  in  fortifying  wines  may  be  re- 
covered from  such  wines  only  on  the  premises  of  a  duly  authorized 
grape  brandy  distiller,  and  for  the  purpose  of  such  recovery  wine  so 
fortified  may  be  received  as  material  on  the  premises  of  such  a  dis- 
tiller, on  a  special  permit  of  the  collector  of  internal  revenue  in 
whose  district  the  distillery  is  located ;  and  the  distiller  will  be  held 
to  pay  the  tax  on  the  product  from  such  wines  as  will  include  both 
the  alcoholic  strength  therein  produced  by  the  fermentation  of  the 
grape  juice  and  that  obtained  from  the  added  distilled  wine  spirits: 

"Provided,  That  when  application  for  such  special  permit  for  re- 
distillation shall  be  made  by  the  producer  of  any  wines  fortified  with 
brandy  subject  to  the  tax  of  55  cents  per  proof  gallon,  before  such 
wine  shall  have  been  removed  from  the  premises  of  the  winery 
where  fortified  and  the  redistillation  is  had  under  regulations  made 
by  the  Commissioner  of  Internal  Revenue,  with  the  approval  of  the 
Secretary  of  the  Treasury,  an  abatement  or  refund  of  the  tax 
assessed  against  said  producer  shall  be  allowed  equivalent  to  55 
cents  per  proof  gallon  of  brandy  contained  in  said  spirits  at  the  time 
of  redistillation,  which  amount  of  brandy  shall  be  ascertained  by  the 
Commissioner  of  Internal  Revenue,  under  regulations  approved  by 
the  Secretary  of  the  Treasury,  and  wine  spirits  so  recovered  may 
be  used  in  the  manner  provided  by  law  for  the  fortification  of  other 
wine: 

"Provided,  That  such  wine  spirits  on  which  abatement  or  refund 
of  tax  is  allowed  shall  not  exceed  the  total  amount  of  alcohol  in 
such  wine  over  and  above  fourteen  per  centum  thereof." 

That  section  three  and  section  six  of  the  Act  of  June  seventh, 
nineteen  hundred  and  six,  amending  the  laws  relating  to  the  fortifica- 
tion of  pure  sweet  wines,  are  hereby  amended  to  read  as  follows : 

"SEC.  3.  That  the  Commissioner  of  Internal  Revenue  is  hereby 
authorized  to  assign  at  each  winery  where  wines  are  to  be  fortified 
such  number  of  gaugers  or  storekeeper  gaugers,  in  the  capacity  of 
gaugers,  for  special  duties  as  may  be  necessary  for  the  proper  super- 
Vision  of  the  making  and  fortifying  of  such  wines,  and  the  com- 
pensation of  such  officers  shall  not  exceed  $5  per  diem  while  so  as- 
signed, together  with  their  actual  and  necessary  traveling  expenses, 
and  ajso  a  reasonable  allowance  for  their  board  bills,  to  be  fixed 
by  the  Commissioner  of  Internal  Revenue,  but  not  to  exceed  $2 
per  diem  for  said  board  bills.  That  bonds  hereafter  given  under 
the  provisions  of  the  aforesaid  Act  of  October  first,  eighteen  hun- 

6 


WAR   REVENUE    LAW 

dred  and  ninety,  as  amended,  shall  be  conditioned  for  the  payment 
of  the  tax  on  all  brandy  removed  thereunder  and  not  used  and  ac- 
counted for  within  the  time  and  in  the  manner  required  by  law  and 
regulations,  and  for  the  payment  of  all  taxes  imposed  on  the  brandy 
so  withdrawn  and  used  for  fortifications  ;  and  the  said  bonds  shall 
contain  such  other  conditions  as  the  Commissioner  of  Internal 
Revenue,  with  the  approval  of  the  Secretary  of  the  Treasury,  may 
by  regulation  prescribe. 

"SEC.  6.  That  any  person  who  by  any  process  recovers  from 
wines  fortified  under  the  provisions  of  the  aforesaid  Act  approved 
October  first,  eighteen  hundred  and  ninety,  as  amendments  thereto, 
any  brandy  or  wine  spirits  used  in  the  manufacture  or  fortification 
of  said  wine,  otherwise  than  is  provided  for  in  said  Act  and  its 
amendments,  or  who  shall  rectify,  mix,  or  compound  with  distilled 
spirits  or  other  materials,  except  as  provided  in  this  Act,  such  grape 
brandy,  fortified  wines  or  wine  spirits  unlawfully  recovered  there- 
from, shall,  on  conviction,  be  punished  for  each  such  offense  by  a 
fine  of  not  less  than  $200  nor  more  than  $1,000.  But  the  provisions 
of  this  section  and  the  provisions  of  section  thirty-two  hundred  and 
forty-four  of  the  Revised  Statutes  of  the  United  States,  as  amended, 
relating  to  rectification,  or  other  internal  revenue  laws  of  the  United 
States,  shall  not  be  held  to  apply  to  or  prohibit  the  mixing  or  blend- 
ing of  pure  sweet  wines  fortified  under  the  provisions  of  this  Act 
with  each  other  or  with  other  wines  : 

"Provided,  That  the  pure  sweet  wines  fortified  under  the  provi- 
sions of  this  Act  may  be  used  in  the  manufacture  of  cordials, 
liqueurs,  and  similar  compounds  on  which  an  internal  revenue  tax  of 
24  cents  a  gallon  is  imposed,  and  otherwise  the  provision  of  section 
thirty-two  hundred  and  forty-four  of  the  Revised  Statutes  of  the 
United  States  shall  remain  in  full  force  and  effect." 


Unauthorized 


Penalty. 


SPECIAL  TAXES 

SEC.  3.  That  on  and  after  November  first,  nineteen  hundred  and 
fourteen,  special  taxes  shall  be,  and  hereby  are,  imposed  annually  as 
follows,  that  is  to  say: 

First.  Bankers  shall  pay  $1  for  each  $1,000  of  capital  used  or  computation8 
employed,  and  in  estimating  capital  surplus  and  undivided  profits  tax— defined, 
shall  be  included.  The  amount  of  such  annual  tax  shall  in  all  cases 
be  computed  on  the  basis  of  the  capital,  surplus,  and  undivided 
profits  for  the  preceding  fiscal  year.  Every  person,  firm  or  com- 
pany, and  every  incorporated  or  other  bank,  having  a  place  of  busi- 
ness where  credits  are  opened  by  the  deposit  or  collection  of  money 
or  currency,  subject  to  be  paid  or  remitted  upon  draft,  check,  or 
order,  or  where  money  is  advanced  or  loaned  on  stocks,  bonds, 
bullion,  bills  of  exchange,  or  promissory  notes,  or  where  stocks, 
bonds,  bullion,  bills  of  exchange,  or  promissory  notes  are  received 
for  discount  or  sale,  shall  be  a  banker  under  this  Act : 


WAR   REVENUE   LAW 

(T.  D.  2064.) 

Emergency  revenue  law — Tax  on  undivided  profits. 
Method  of  arriving  at  undivided  profits  to  be  entered  into  the  basis  upon 
which  tax  on  bankers,  under  the  act  of  October  22,  1914,  is  to  be  com- 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  November  23,  1914. 
.      To  collectors  of  internal  revenue,  revenue  agents,  and  others: 

Subdivision  1,  section  3,  act  of  October  22,  1914,  imposes  an  annual 
tax  upon  bankers  of  $1  upon  each  $1,000  of  capital,  surplus,  and  undivide< 
profits  used  or  employed  during  the  preceding  fiscal  year. 

Many  inquiries  have  been  received  from  bankers  as  to  the  proper  meth 
of  arriving  at  the  amount  of  undivided  profits  to  be  used  in  the  basis  upon 
which   the   tax    is    computed    when    such    undivided   profits    have    varied    or 

In  T.  D.  19797,  dated  July  29,  1898,  it  was  held  that  the  undivided  profits 
should  be  figured  for  each  business  day,  and  the  average  thereof  taken  as  the 
amount  of  undivided  profits  to  be  used  in  computing  the  tax  due.  In  many 
instances  it  is  clear  that  such  a  method  would  be  more  or  less  impracticable 
and  involve  too  lengthy  a  calculation  in  arriving  at  the  basis  desired.  There- 
fore, while,  perhaps,  the  daily  average  of  undivided  profits,  as  set  forth  above, 
is  the  one  absolutely  accurate  method  by  which  to  arrive  at  the  amount  to  be 
entered  into  the  total  of  capital,  surplus,  and  undivided  profits,  this  office 
will  accept  a  return,  under  oath,  from  any  banker  where  the  undivided  profits 
are  computed  in  any  manner  whereby  a  fair  and  just  amount  is  arrived  at 
representing  the  average  amount  of  the  undivided  profits  employed  by  the 
bank  during  the  fiscal  year  preceding  the  year  for  which  the  tex  is  due. 

It  should  be  understood,  in  the  event  the  amount  of  undivided  profits 
arrived  at  by  the  banker  is  questioned,  that  the  average  undivided  profits 
should  be  computed  for  each  business  day,  as  set  forth  in  T.  D.  19797. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 

b£arom  Provided,  That  any  postal  savings  bank,  or  savings  bank  having 
no  capital  stock,  and  whose  business  is  confined  to  receiving  de- 
posits and  loaning  or  investing  the  same  for  the  benefit  of  its  de- 
positors, and  which  does  no  other  business  of  banking,  shall  not  be 
subject  to  this  tax. 

(1)  The  decision  of  the  Supreme  Court  in  the  case  of  Selden  v.  Equita- 
ble Trust  Co.   (94  U.  S.,  419)   construes  section  3407,  Revised  Statutes,  the 
language  of  which  in  defining  bankers  is  identical  with  section  2. 

The  test  question  as  to  the  liability  of  a  company  or  firm  as  bankers, 
as  laid  down  in  that  case  is  whether  or  not,  having  a  place  of  business,  a 
firm  or  person  is  embraced  in  any  one  of  the  three  following  classes : 

First.  Do  they  have  a  place  of  business  "where  credits  are  opened  (to 
the  general  public)  by  the  deposit  or  collection  of  money  or  currency,  sub- 
ject to  be  paid  or  remitted  upon  draft,  check,  or  order"? 

Second.  Do  they  have  a  place  of  business  where  money  is  advanced  or 
loaned  on  collaterals  (stocks,  bonds,  etc.)  ? 

Third.  Do  they  have  a  place  of  business  where  stocks,  bonds,  bullion, 
bills  of  exchange,  or  promissory  notes  are  received  from  another  person, 
for  sale,  or  bills  of  exchange  of  promissory  notes  are  received  for  dis- 
count, belonging  to  that  other  person?  (Vol.  2,  Treas.  Dec.  (1898),  No. 
20349.) 

(2)  Bankers,  as  well  as  all  other  special-tax  payers,  must  be  included  in 
Record  No.  10,  kept  by  collectors  for  public  inspection  under  section  3240, 

8 


WAR   REVENUE    LAW 

Revised  Statutes;  but  nothing  is  required  to  be  stated  in  the  record  but  the 
name  of  the  special-tax  payer,  his  business,  the  place  of  business,  and  the 
time  of  payment  of  the  special  tax.  (Vol.  2,  Treas.  Dec.  (1898),  No.  19969.) 

(3)  Loaning   money   on   the   personal   notes   of   the   borrowers,   without 
collateral  security,  is  not  the  business  of  banking  contemplated  by  the  statute. 
(Vol.  2,  Treas.  Dec.    (1898),   No.  20264.) 

(4)  When  the  charter  of  a  savings  bank  (or  other  corporate  bank,  is  sur- 
rendered, and  the  same  persons  who  are  officers  and  stockholders  thereof 
carry  on  a  private  banking  business,  a  new  special  tax  is  required.     (Vol.  2, 
Treas.  Dec.   (1898),  No.  20336.) 

(5)  Certain    merchants    receiving    deposits    from    grain    buyers    and   not 
from  the  general  public  do  not  thereby  become  bankers  within  the  meaning 
of  the  statute.     (Vol.  2,  Treas.  Dec.    (1898),  No.  20341.) 

(6)  City  merchants  who  receive  on  deposit  money  from  country  mer- 
chants who  are  their  customers,  for  the  convenience  of  the  latter,  but  not 
opening  such  accounts  with  the  public  generally,  are  not  regarded  as  sub- 
ject to  special  tax  as  bankers.     (Vol.  2,  Treas.  Dec.   (1898),  No.  20342.) 

(7)  The  receiving  of  employees'  deposits  on  interest  does  not  involve  a 
company  or  firm  in  special-tax  liability  as  bankers.      (Vol.   2,  Treas.   Dec. 
(1898),   No.  20343.) 

(8)  Merchants  do  not  bring  themselves  within  the  definition  of  bankers 
by  reason  of  selling  their  own  drafts  to  their  customers;  they  are  not,  on 
this  account,  required  to  pay  special  tax  as  bankers.     (Vol.  2,  Treas.  Dec. 
(1898),  No.  20365.) 

(9)  In  the  case  of  a  bank  with  branches,  a  special  tax  is  required  of 
each  branch,  the  special  tax  being  due  as  to  each  place  where  the  business 
of  banking  is  carried  on.     (Sec.  3235,  Rev.  Stat.,  1st  clause;  Vol.  2,  Treas. 
Dec.    (1898),  No.  20397.) 

(10)  If  twro  or  more  bankers,  each  of  whom  has   paid  a  special  tax, 
consolidate  their  business,   the  consolidated  banking  firm  must  pay  a  new 
special  tax  from  the  date  of  the  consolidation.     But  in  neither  case  are  the 
capital  and  surplus  of  the  old   (defunct)   firm  to  be  considered  in  reckoning 
the  special  tax  of  the  new  firm.     (Vol.  2,  Treas.  Dec.  (1898),  No.  20419.) 

(11)  Bank's  special  tax — Change  of  name. — Where  a  banking  firm   (not 
a  corporation,  changes  its  name,  without  any  change  in  its  membership,  spe- 
cial tax  is  not  required  to  be  paid  again  on  account  of  such  change.     (Vol. 
2,  Treas.  Dec.   (1899),  No.  20786.) 

(12)  Private  banks  having  no  capital  stock  are  subject  to  tax  as  bankers. 

(13)  In  estimating   the   amount  of   special   tax   based   upon   capital   and 
surplus,  the  amount  invested  in  United  States  bonds  is  not  to  be  deducted. 

•  (14)  The  amount  invested  in  a  bank  building  is  not  to  be  deducted. 

(15)  A   bank    in    liquidation,    doing    no    business    except   collecting    and 
dividing  assets  in  closing,  is  not  required  to  pay  special  tax. 

(16)  A  bank  engaged  in  business  in  the  month  of  July  must  pay  special 
tax   for  the  entire  year,  beginning  July  1. 

(17)  A  trust  company  is  liable  as  a  banker  if  it  comes  within  any  one 
of  the  three  clauses  of  definition  in  subdivision  1,  section  3,  act  of  October 
22,   1914. 

(18)  Borrowed    capital    must    be    taken    into    account    when    estimating 
amount  of  special  tax. 

(19)  It  is  not  the  subscribed   capital,  but  the  capital  actually  employed 
during  the  preceding  fiscal  year,  that  is  to  be  taken  as  the  basis  for  estimat- 
ing the  special  tax.      (Vol.  2,  Treas.  Dec.,   No.   19843.) 

(20)  The  advancing  or  loaning  of  money  by  brokers  on  the  collateral 
security  of  stocks,  if  these  loans  or  advances  are  confined  by  them  strictly 


WAR   REVENUE   LAW 

to  customers  who  have  given  them,  as  brokers,  orders  for  the  purchase  of 
stocks  and  the  collateral  is  held  solely  to  secure  themselves  m  filling  such 
orders  is  not  regarded  as  involving  them  in  special-tax  liability  as  bankers 
within' the  meaning  of  the  statute.  (Vol.  1,  Treas.  Dec.  (1889),  No.  21152.)  . 
Surplus  on  which  bankers  are  taxed  includes  all  surplus  set  apart  for 
carrving  on  the  general  business  of  the  bank.  It  also  includes  undivided 
profits.  22  A.  G.,  Op,  320;  23  Id.  341. 

(T.  D.  2045.) 

Emergency  revenue  law — Preparation  of  bankers'  lists. 
Instructions  as  to  the  preparation  of  special  bankers'  lists. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  November  6,  1914. 
To  collectors  of  internal  revenue: 

In  view  of  the  provisions  of  section  3  of  the  act  approved 
October  22,  1914,  imposing  a  special  tax  on  bankers  (for  which 
special-tax  stamps  are  not  provided),  each  collector  will,  on  or  be- 
fore the  10th  of  December,  1914,  and  on  or  before  August  10,  1915, 
prepare  and  forward  to  this  office  a  special  bankers'  list  for  the 
preceding  month. 

This  list  will  be  prepared  on  blanks  prescribed  for  the  regular 
assessment  list,  Form  23,  and  will  be  arranged  alphabetically,  (first) 
by  names  of  cities  or  other  places,  and  (second)  by  names  of  bank- 
ers in  each  city  or  other  place  in  which  two  or  more  banks  are 
located.  If  the  district  comprises  two  or  more  States  or  Territories, 
the  names  of  the  bankers  should  be  arranged  as  above  under  the 
names  of  the  States  and  Territories,  also  alphabetically  arranged. 

The  heading  of  column  3  should  be  changed  to  read,  "Amount 
of  capital,"  and  in  this  column  will  be  entered  the  amount  of  capital, 
including  the  surplus  and  undivided  profits,  employed  in  business 
during  the  last  fiscal  year. 

In  column  4  will  be  entered  the  period,  as  "8  months  ending 
June  30,  1915,"  "6  months  ending  December  31,  1915." 

In  column  5  of  the  November  list  will  be  entered  the  amount  of 
tax  computed  on  the  basis  of  eight  twelfths  of  the  tax  at  $1  for  each 
$1,000  of  capital  reported  in  column  3  in  each  case,  as  provided 
above. 

In  column  6  will  be  entered  the  basis  of  the  assessment  as  now 
required  by  the  regulations  of  this  office,  and  in  column  7  will  be 
entered  the  date  of  the  receipt  of  Form  457. 

Bankers  whose  returns  are  received  after  the  special  bankers' 
list  has  been  forwarded  and  those  commencing  business  subsequent 
to  the  month  of  November  will  be  reported  on  the  regular  assess- 
ment lists,  Form  23. 

Collectors  will  receipt  for  the  amounts  assessed  on  the  special 
bankers'  list  on  a  special  receipt,  Form  23^. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


WAR   REVENUE   LAW 

Second.    Brokers  shall  pay  $30.    Every  person,  firm,  or  company,  fin Jdroker8  ~"  de" 
whose  business  it  is  to  negotiate  purchases  or  sales  of  stocks,  bonds, 
exchange,  bullion,  coined  money,  bank  notes,  promissory  notes,  or 
other  securities,  for  themselves  or  others,  shall  be  regarded  as  a 
broker : 

Provided,    That  any   person  having  paid   the   special  tax   as   a      Bankers  not 
banker  shall  not  be  required  to  pay  the  special  tax  as  a  broker.  brokers?  b ' 

(21)  The  loaning  of  money  for  oneself  or  for  others  on  commission  does 
not  subject  the  lender  to  special  tax  as  a  broker;  but  if  a  person  makes  it 
a  business  to  negotiate  purchases  or  sales  of  stocks,  bond,  exchange,  bullion, 
coined  money,  bank  notes,  promissory  notes,  or  other  securities,  for  himself 
or 'others,  he  is  required  to  pay  the  tax.     "It  is  only  when  making  sales  and 
purchases  is  his  business,  his  trade,  his  profession,  his  means  of  getting  his 
living,  or  making  his  fortune  that  he  becomes  a  broker  within  the  meaning 
of  the  statute."     (Warren  et  al.  v.  Shook,  91  U.  S.,  704.) 

(22)  Persons  or  firms  acting  as  agents  for  parties  loaning  money  upon 
promissory   notes   secured   by   mortgages  are  not  brokers. 

(23)  A  lawyer   can   make   investments    for  clients   without  being  liable, 
unless  he  does  it  to  such  an  extent  that  it  can  be  called  a  "business." 

(24)  Loan  and  mortgage  companies  not  liable  for  loaning  money  on  notes 
or  bonds  secured  by  mortgage  or  trust  deed  on  real  estate.     If  they  purchase 
notes,  bonds,  or  other  securities  they  become  liable  as  brokers. 

(25)  A    person    engaged    in    the   business   of    placing   loans    secured    by 
notes  and  mortgages   upon   real  estate,   acting  simply   as  agent,   receiving   a 
commission  for  his  services 'in  obtaining  the  application  for  the  loan  and  at- 
tending to  the  execution  of  the  papers,  is  not  a  broker. 

(26)  A  person  engaged  in  the  business  of  selling  real  estate,  acting  as 
the  agent  of  the  owner  in  finding  purchasers  and  receiving  a  commission  for 
his  services,  is  not  a  broker. 

(27)  When   persons   negotiate  purchases   or   sales   of   promissory   notes, 
if  these  are  only  occasional  acts  and  do  not  constitute  their  regular  business, 
they  are  not  brokers  within  the  meaning  of  the  act. 

(28)  Bucket-shop  proprietors  giving  memorandum  of  transactions  are 
required  to  pay  special  tax  as  brokers. 

(29)  The  principal's  special-tax  stamp   for  his  place  of  business  in  an- 
other city  covers  the  transactions  only  at  that  place  of  business  and  can  not 
cover  the  business  done  elsewhere  at  a  branch  office. 

(30)  Broker's  tax  is  not  required  to  be  paid  at  branch  offices  where  a 
clerk  is  employed  whose  sole  duty  is  to  receive  orders  and  transmit  them 
by  wire  to  the  head   of  the  office.     The   mere   receipt  and  transmission  by 
clerks   of  orders  is  not  regarded  as  carrying  on  the  business  of   a  broker. 
(Vol.  2,  Treas.  Dec.,  No.  19843.) 

(31)  Special  tax   must  be  paid   for  every  branch  office   where  the   em- 
ployee in  charge  not  only  receives  and  transmits  orders  with  the  money  to 
the  main  office,  but  also  receives  from  the  main  office  moneys  for  disburse- 
ment to  customers,  or  keeps  accounts  with  the  customers  at  the  branch  office, 
or  does  other  business  with   relation  to  the  transaction  of  brokers  at  such 
branch  office.     Separate  special  tax  must  be  paid  and  a  separate  stamp  taken 
out  for  every  "bucket  shop,"  whether  such  office  is  called  a  branch  office  or 
a  main  office.     (Vol.  2,  Treas.  Dec.  (1898),  No.  20374.) 

(32)  It  is  the  language  of  the  statute,  and  not  the  ordinary  and  usual 
meaning  of  the  word  "broker,"  which  must  govern  in  determining  who  is  a 
broker  required  to  pay  a  special  tax.     (Vol.  1,  Treas.  Dec.  (1899),  No.  20549.) 


WAR   REVENUE   LAW 

(33)  While  a  mining  syndicate  or  other  association  issuing  certificates 
"!      of  stock  in  a  company  organized  by  it  is  not  required  to  pay  a  special  tax  as 

a  broker  therefor,  a  manager  or  other  person  employed  by  it  to  sell  such 
certificates  on  commission  is  a  broker  and  required  to  pay  special  tax.  (Vol. 
1,  Treas.  Dec.  (1899),  No.  20037.) 

(34)  An    express    or    railway    agent    doing   business    for    his    principals 
only,  not  a  broker.   (Vol.  1,  Treas.  Dec.   (1898),  No.^10106.) 

(35)  Bills  of  exchange,  bonds  for  the  payment  of'money,  and  promissory 
notes   are   in   the  popular   acceptation   of   the   term   "securities"    for   money. 
(Jennings  v.  Davis,  31  Conn.,  139.) 

(36)  Securities:    "Evidences  of  indebtedness."     "Written  assurance  for 
the  return  or  payment  of  money."      (Anderson's  Dictionary  of   Law.) 

(37)  Proprietors  of  bucket  shops  who  issue  memoranda  of  their  trans- 
actions   in    stocks    and    in    cotton,   grain,    etc.,    even    though    they    sell    only 
"futures,"  are  required  to  pay  special  tax  both  as  brokers  and  as  commer- 
cial brokers.     (Vol.  2,  Treas.  Dec.  (1899),  No.  21007.) 

(38)  Loan   and   mortgage   companies   are   not  liable   for   special   tax   as 
brokers  unless  they  engage  in  the  sale  of  the  securities  on  which  they  make 
loans.     When  they  engage  in  such   sales  they  become  brokers  and  are  re- 
quired to   pay   special   tax   accordingly.      (Vol.   2,    Treas.    Dec.    (1899),    No. 
21620.) 

(39)  An  express  company  engaged  in  the  business  of  buying  or  selling 
foreign   money   or   bills    of    exchange    is    required   to    pay    special   tax   as    a 
broker.     (Vol.  2,  Treas.  Dec.  (1899),  No.  21709.) 

(40)  No  person  or  firm  liable  to  special  tax  for  simply  buying  or  selling 
real  estate  on  commission.     (T.  D.  19755.) 

»  (41)  Business  of  selling  land  on  commission,  taking  applications  for  farm 
loans,  and  writing  insurance,  is  not  the  business  of  a  broker,  and  special  tax  is 
not  required.  (T.  D.  19872.) 

(42)  Purchase  of  State,  county,  school,  or  district  orders,  or  warrants,  by 
any  person  does  not  subject  him  to  special  tax  as  a  broker,  if  not  done  to 
an  extent  constituting  it  his  business.     (T.  D.  19885.) 

(43)  Broker's  special  tax  not  required  for  negotiating  loans  of  money. 
(T.  D.  19894.) 

(44)  Occasional  transactions   in   sale   of   sight   draft   do   not  necessitate 
the  payment  of  special  tax  as  broker.     (T.  D.  19937.) 

(45)  Only  those  whose  business  it  is  to  negotiate  purchases  or  sales  of 
the  securities  contemplated  by  paragraph  two  of  section  2,  act  of  June  30, 
1898   (subdivision  2,  of  section  3,  act  of  October  22,  1914),  are  brokers  and 
liable  to  tax.      (T.  D.  19940.) 

(46)  Special  tax  not  required  to  be  paid  by  a  person  because  of  the  fact 
of  his  holding  a  seat  on  the   stock  exchange,   if  he  transacts   no  business, 
directly  or  indirectly.     (T.  D.  19943.) 

(47)  Special  tax  as  broker  not  required  for  the  mere  cashing  of  checks 
for  customers  by  merchants.      (T.   D.   20026.) 

(48)  Persons  whose  practice  it  is  to  buy  fee  bills  of  witnesses  are  not 
brokers.     Such  paper  is  not  properly  described  by  any  of  the  terms  used  in 
the  law,  to  wit,  "stocks,  bonds,  exchange,  bullion,  coined  money,  bank  notes, 
promissory  notes,  or  other  securities."     (T.  D.  21647.) 

An  express  company  which  issues  money  orders  and  travelers'  checks 
is  not  taxable  as  a  broker.    23  A.  G.,  Op.  139. 

-deTnned"°ker8  Third.  Pawnbrokers  shall  pay  $50.  Every  person,  firm  or  com- 
pany whose  business  or  occupation  it  is  to  take  or  receive,  by  way 
of  pledge,  pawn,  or  exchange,  any  goods,  wares,  or  merchandise,  or 


WAR   REVENUE    LAW 

any  kind  of  personal  property  whatever,  as  security  for  the  repay- 
ment of  money  loaned  thereon,  shall  be  deemed  a  pawnbroker. 

The  actual  value  of  securities  pledged  is  immaterial  in  computing  the 
tax.    22  A.  G.,  Op.  219. 

(49)  A  person  is  not  required  to  pay  a  special  tax  as  a  pawnbroker  for 
rare  or  occasional  acts,  which  can  not  be  regarded  as  his  business  or  occupa- 
tion.    (Circular  No.  508,  Aug.  8,  1898;  Vol.  2,  Treas.  Dec.  (1898),  No.  19843.) 

(50)  Special  tax  of  pawnbroker   not   required  to   be  paid   for   making 
loans  when  the  chattels  are  not  taken  or  received  by  way  of  pledge,  pawn, 
or  exchange.     (T.  D.  20552.) 

(51)  A  person  using  no  tickets  in  his  business,  but  making  a  pretense 
of  buying  articles  which  are  brought  to  him,  which  he  holds  with  a  verbal 
agreement  that  the  articles  can  be  bought  back  again  by  the  person  selling 
them,   upon  the  payment  of   a  specified  bonus,   is   liable   to   special  tax   as 
pawnbroker.     (T.  D.  20439.) 

Fourth.  Commercial  brokers  shall  pay  $20.  Every  person,  firm, 
or  company  whose  business  it  is  as  a  broker  to  negotiate  sales  or  fined, 
purchases  of  goods,  wares,  produce,  or  merchandise,  or  to  negotiate 
freights  and  other  business  for  the  owners  of  vessels,  or  for  the 
shippers  or  consignors  or  consignees  of  freight  carried  by  vessels, 
shall  be  regarded  as  a  commercial  broker  under  this  Act. 

(52)  Commercial  brokers  are  those  persons  only  who,  without  having  in 
their  possession  goods,  wares,  or  merchandise,  negotiate  sales  or  purchases 
thereof  on   commission.      (Vol.  2,  Treas.  Dec.    (1898),   No.  20416.) 

(53)'  Commission  merchants  who  receive  goods  in  possession  to  sell  for 
others  are  not  commercial  brokers.  The  difference  between  a  factor  or  com- 
mission merchant  and  a  broker  is  that  a  factor  may  buy  and  sell  in  his  own 
name  and  has  the  goods  in  his  possession,  while  a  broker,  as  such,  can  not 
ordinarily  buy  or  sell  in  his  own  name  and  has  no  possession  of  the  goods 
sold.  (Slack  v.  Tucker,  23  Wall.,  321.) 

(54)  Cattle  brokers,  who  receive  and  sell  cattle  on  commission,  are  not 
required  to  pay  special  tax  as  commercial  brokers. 

(55)  A  person  who  is  employed  by  certain  firms  to  solicit  and  receive 
orders  on  commission  for  their  goods  and  is  bound  by  his  agreement  with 
them  to  give  his  entire  services  to  them,  to  the  exclusion  of  other  firms  or 
persons,  not  a  commercial  broker. 

(56)  Warehousemen  who  receive  tobacco,  cotton,  or  any  other  produce 
or  goods  on  consignment  for  sale  on  commission  are  not  liable  as  commer- 
cial brokers,  but  are  liable  as  commission  merchants  under  act  of   October 
22,  1914. 

(57)  Auctioneers  who  receive  and  sell  goods  at  their  auction  rooms  or 
on  the  premises  of  the  owners  on  commission  are  not  subject  to  special  tax 
as  commercial  brokers. 

(58)  Drug  brokers  are  subject  to  the  special  tax. 

(59)  If  cotton  buyers  have  possession  of  cotton  which  they   sell,   they 
are  not  liable  as  commercial  brokers;  if  they  have  not,  and  sell  on  commis- 
sion, they  are  liable. 

(Circular  No.  508,  Vol.  2,  Treas.  Dec.  (1898),  No.  19843.)       * 

(60)  Persons  representing  cigar  manufacturers  who  are  furnished  with 
samples  and  send  orders  to   factories,  receiving  a  commission   for  furnish- 
ing orders,  are  liable  as  commercial  brokers.     (T.  D.  19575.) 

(61)  Warehouse  receipts  for  grain  transferred  through  elevators  liable 
— Brokers  must  pay  special  tax  at  branch  offices.     (T.  D.  19615.) 

13 


WAR    REVENUE    LAW 

(62)  Definition   of   commercial  broker.     Settled  ruling   modifying  prior 
rulings.     (Vol.  2,  Treas.  Dec.    (1898),  No.  20417.) 

Decision  of  Comptroller  Tracewell.     (VI  Comp.  Dec.,  545.) 

(63)  Persons  whose  business  it  is  to  obtain  orders  from  those  who  desire 
to  buy  goods,  and  who  purchase,  receive,   and  forward  the  goods  to  their 
customers,  are  not  on  this  account  commercial  brokers,  nor  are  they  required 
to  pay  special  tax  under  the  act  of  June  13,  1898,  for  such  business,  though 
they  make  a  profit  therein  through  discounts  allowed  them  by  merchants  and 
commissions  paid  them   by  their   customers— "Installment  purchasers,"   who 
have  running  accounts  at  stores  and  give  orders  to  their  customers,  on  which 
orders  these  customers  themselves  buy  and  receive  goods,  are  required  to  pay 
special  tax  as  commercial  brokers.     (T.  D.  19884.) 

(64)  A  firm  negotiating  sales  of  goods  not  shipped  to  them  nor  held  in 
their  possession  before  being  sold,  but  shipped  from  other  points  direct  to 
purchasers  from  the  mills,  they  being  liable  for  all  sales  and  doing  their  own 
"billing,"  making  settlements  with  the  mills  at  the  end  of  each  month,  retain- 
ing a  stipulated  commission,  held  to  be  liable  to  tax  as  commercial  brokers. 
(T.  D.  19938.) 

(65)  Persons  representing  several  houses  in  the  negotiation  of  sales  of 
goods  on  commission   (the  goods  not  being  in  their  possession),  if  they  are 
not  bound  by  agreement  to  act  solely  for  these  houses,  but  are  at  liberty  to 
engage  in  the  same  transactions   for  other  houses,  are  commercial  brokers, 
and  must  pay  special  tax  as  such.     (T.  D.  19966.) 

(66)  Special  tax  is  not  required  to  be  paid  for  representing  one,  two,  or 
three  firms  to  solicit  and  receive  orders,  if  person  is  bound  by  agreement  to 
give  his  entire  service  to  them.     (T.  D.  20117.) 

(67)  Leaf   tobacco    dealers,    who    are   also    engaged    in   the   business    of 
negotiating  the  purchase  of  tobacco  as  agents  for  others,  on  commission,  are 
commercial  brokers   under  the   fourth  paragraph   of   section  2   of  the  war- 
revenue  act.      (T.  D.  20592.) 

Customhouse         Fifth.    Custom-house  brokers  shall  pay  $10.    Every  person,  firm, 

brokers  —  de-  ...  \     J  e      ,  t_ 

fined.  or  company  whose  occupation  it  is,  as  the  agent  of  others,  to  arrange 

entries  and  other  custom-house  papers,  or  transact  business  at  any 
port  of  entry  relating  to  the  importation  or  exportation  of  goods, 
wares,  or  merchandise,  shall  be  regarded  as  a  custom-house  broker. 

(68)  If  the  complete  business  of  customhouse  brokers  is  transacted  by 
parties  at  offices  at  different  ports   of   one   district,   a  separate  and   distinct 
special  tax  must  be  paid  for  each  of  their  offices,  under  the  provisions  of  sec- 
tion 3235,  Revised  Statutes,  page  114.     (Circular  No.  508,  Aug.  8,  1898;  vol.  2, 
T.  D.,  No.  19843.) 

(69)  Transactions    for   which    customhouse   brokers'    special    tax   is   not 
required  to  be  paid.     Vol.  2,  T.  D.   (1898),  No.  20106.) 

(70)  A  special-tax  stamp  taken  out  by  a  person  in  his  own  name  as  a 
customhouse  broker  is  sufficient  to  cover  the  business   done  by  him  in   his 
own  name,  at  the  place  of  business  stated  therein,  whether  such  business  is 
done  by  him  on  his  own  account  or  as  an  agent  for  other  persons.     (T.  D. 
20206.) 

(71)  Bills  of  sale  of  vessel  property  are  "customhouse  papers"  in  contem- 
plation of  the  statute,  and  a  person  "whose  occupation  it  is,  as  the  agent  of 
others,"  to  prepare   such  bills   of   sale   is   required   to   pay   special  tax   as   a 
customhouse  broker.     (T.  D.  20321.) 

(72)  Persons  whose  occupation  it  is,  as  agents  for  others,  to  enter  and 
clear  vessels  at  the  customhouse,  can  not  be  relieved  from  payment  of  special 

(  14 


WAR   REVENUE    LAW 

tax  as  customhouse  brokers  on  the  ground  that  they  have  paid  special  tax 
as  commercial  brokers,  which  entitles  them  "to  negotiate  freights  or  other 
business  for  the  owners  of  vessels."  (T.  D.  20725.) 

Sixth.   Proprietors  of  theaters,  museums,  and  concert  halls,  where      Theatres,  ma- 

,.,...  j        1         •  ,  •  f  scums   and    con- 

a  charge  for  admission  is  made,  having  a  seating  capacity  of  not  cert  hails  —  de- 
more  than  two  hundred  and  fifty,  shall  pay  $25 ;  having  a  seating  fined* 
capacity  of  more  than  two  hundred  and  fifty  and  not  exceeding  five 
hundred  shall  pay  $50;  having  a  seating  capacity  of  exceeding  five 
hundred  and  not  exceeding  eight  hundred,  shall  pay  $75 ;  having  a 
seating  capacity  of  more  than  eight  hundred,  shall  pay  $100.  Every 
edifice  used  for  the  purpose  of  dramatic  or  operatic  or  other  repre- 
sentations, plays,  or  performances,  for  admission  to  which  entrance 
money  is  received,  not  including  halls  or  armories  rented  or  used 
occasionally  for  concerts  or  theatrical  representations,  shall  be  re- 
garded as  a  theater: 

Provided,  That  whenever  such  edifice  is  under  lease  at  the  pas- 
sage of  this  Act,  the  tax  shall  be  paid  by  the  lessee,  unless  other- 
wise stipulated  between  the  parties  to  said  lease. 

(73)  Persons  are  not  required  to  pay  special  taxes  for  the  mere  occa- 
sional renting  of  their  hall  for  public  performances  to  dramatic  companies 
or  other  persons  charging  entrance  money  therefor,  but  the  special  tax  of 
$10  is  required  to  be  paid  by  such  persons  or  companies  if  they  give  dramatic 
performances  or  the  other  exhibitions  specifically  mentioned  in  paragraph  8, 
section  2.     (Subdivision  6,  Sec.  3,  Act  Oct.  22,  1914.) 

(74)  Where    theaters    are    entirely    closed    to    performance    during   the 
months  of  July  and  August,  and  only  open  in  the  month  of  September,  the 
special  tax  is  to  be  reckoned  from  the  1st  day  of  September  to  the  1st  day 
of  July  following,  at  the  rate  of  $100  for  the  year  beginning  July  1.     (Nov. 
1.  1914,  to  June  30,  1915,  current  year.)      (Circular  No.  508,  Aug.  8,  1898; 
Vol.  2,  Treas.  Dec.,  No.  19843.) 

(75)  Moving-picture  shows  taxable  as  theaters  under  Section  6.     (T.  D. 
2040.) 

(76)  A  special-tax  stamp  taken  out  by  the  lessees  of  a  theater  can  not, 
upon  their  transferring  their  lease  to  other  persons,  be  transferred  and  made 
to  answer  for  the  latter  persons  in  conducting  the  theater.     (T.  D.  20396.) 

(T.  D.  2040.) 

Emergency  revenue  law — Motion-picture  theaters. 
Motion-picture  theaters  classed  as  taxable  under  the  sixth  paragraph  of  sec- 
tion 3,   act   of   October   22,    1914. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  November  3,  1914. 

SIR  :  Replying  to  your  communication  of  the  26th  ultimo,  you 
are  informed  that  after  careful  consideration  this  office  has  reached 
the  conclusion  that  motion-picture  theaters  come  under  the  sixth 
paragraph  of  section  3  of  the  act  of  October  22,  1914,  and  therefore 
are  taxable  as  theaters. 

Respectfully,  G.  E.  FLETCHER, 

Acting  Commissioner  of  Internal  Revenue. 
COLLECTOR,  ELEVENTH  DISTRICT,  Columbus,  Ohio. 

15 


WAR   REVENUE • LAW 


Circuses  —  de- 
fined. 


Payment 
of  special  tax  in 
one  state  not  an 
exemption  in  an- 
other. 


Exhibitions 
not  enumerated 
herein. 


Seventh.  The  proprietor  or  proprietors  of  circuses  shall  pay  $100. 
Every  building,  space,  tent,  or  area  where  feats  of  horsemanship  or 
acrobatic  sports  or  theatrical  performances  not  otherwise  provided 
for  in  this  Act  are  exhibited, shall  be  regarded  as  a  circus: 

Provided,  That  no  special  tax  paid  in  one  State,  Territory  or  the 
District  of  Columbia  shall  exempt  exhibitions  from  the  tax  in 
another  State,  Territory,  or  the  District  of  Columbia,  and  but  one 
special  tax  shall  be  imposed  for  exhibitions  within  any  one  State, 
Territory,  or  District. 

(77)  Exhibitions  of  feats  of  horsemanship  (such'as  are  seen  in  circuses), 
which  occur  on  race  tracks,  are  subject  to  a  special  tax  of  $100;  but  mere 
tests  of  speed  of  horses  in  racing  are  not  regarded  as  "feats  of  horseman- 
ship" within  the  meaning  of  paragraph  7  of  section  2,  act  of  June  13,  1898. 
(Subdivision  7,  sec.  3,  act  of  Oct.  22,  1914.) 

(78)  Variety  shows,  whether  given  at  summer  resorts  or  elsewhere,  which 
include  "acrobatic  sports,"  come  within  the  definition  of  a  circus  in  the  statute 
which  requires  special  tax  therefor. 

(79)  When  a  circus  is  exhibiting  in  any  State  in  the  month  of  July,  the 
special  tax  of  $100  is  required  to  be  paid  for  the  year  beginning  July  1.     If 
in  the  following  month  the  circus  goes  into  another   State,  the  special  tax 
at  the   rate  of   $100   for  the  year   is  to   be  reckoned   from   the   1st   day   of 
August  to  the  1st  day  of  July  following,  and  a  separate  special-tax  stamp 
must  be  taken  out  accordingly  for  that  State,  and  so  on. 

(80)  The  "theatrical  performances"   contemplated  by  paragraph  7,    sec- 
tion 2,  of  the  act  of  June  13,  1898  (subdivision  7,  sec.  3,  act  of  Oct.  22,  1914), 
are  only  those  which  are  given  in  connection  with  a  circus. 

(81)  A   show   under    canvas    exhibiting,    among   other    things,    acrobatic 
and  athletic  exercises,  but  no  feats  of  horsemanship,  and  having  no  menagerie, 
is  not  subject  to  special  tax  as  a  circus   ($100)  under  paragraph  7  of  section 
2,  act  of  June  13,  1898,  if  the  acrobatic  exercises  are  so  few  and  simple  as  to 
make  it  unreasonable  to  hold  that  they  constitute  the  show  a  circus.     (T.  D. 
19944.) 

(82)  A  small  wagon  show  having  no  "circus  feats,"  but  only  "such  acts 
as  trapeze,  wire  walking,  trained  ponies,  singing,  and  dancing,"  is  not  to  be 
regarded  as  a  circus  within  the  meaning  and  intent  of  paragraph  7  of  section  2, 
act  of  June  13,  1898.     It  is  a  show  coming  under  the  eighth  paragraph,  for 
which  the  special  tax  of  $10  is  required  to  be  paid.     (T.  D.  19975.) 

Eighth.  Proprietors  or  agents  of  all  other  public  exhibitions  or 
shows  for  money  not  enumerated  in  this  section  shall  pay  $10: 

Provideti,  That  a  special  tax  paid  in  one  State,  Territory,  or  the 
District  of  Columbia  shall  exempt  exhibitions  from  the  tax  in 
another  State,  Territory,  or  the  District  of  Columbia,  and  but  one 
special  tax  shall  be  required  for  exhibitions  within  any  one  State, 
Territory,  or  the  District  of  Columbia: 

Provided  further,  That  this  paragraph  shall  not  apply  to  Chau- 
tauquas,  lecture  lyceums,  agricultural  or  industrial  fairs,  or  exhibi- 
tions held  under  the  auspices  of  religious  or  charitable  associations. 

(83)  The  show  of  a  medicine  vender    (consisting  of  various   "athletic, 
humorous,   and  comic  performances,"  there  being  given  also   an   exhibition 
of  ropewalking  and  trapeze  performance,  the  object  being  merely  to  attract 
a  crowd),  liable  to  a  tax  of  $10  under  paragraph  8,  act  of  June   13/1898, 
instead  of  100  under  paragraph  7.     (T.  D.  19830.) 

16 


WAR   REVENUE    LAW 

(84)  The  "theatrical  performances"  contemplated  by  this  paragraph  are 
only  those  which  are  given  in  connection  with  a  circus. 

(85)  Agricultural  associations  are  required  to  pay  a  special  tax  at  the 
rate  of  $10  for  exhibitions,  including  horse  racing. 

(86)  Exhibitions  and  shows  given  on  fair  grounds,  but  not  under  man- 
agement of  the  fair  association,  are  required  to  pay  special  tax. 

(87)  A  lecturer  using*  a  stereopticon  to  illustrate  his  lectures,  and  charg- 
ing an  admission  fee,  is  liable  to  the  special  tax  as  giving  a  public  exhibition 
or  show  for  money. 

(88)  If  an  exhibition  is  given  in  more  than  one  State  the>law  requires 
payment  of  special  tax  for  every  such  State. 

(89)  Amateur  theatrical  exhibitions,  either  in  private  houses  or  licensed 
public  halls,  for  payment  of  expenses  incurred  in  giving  the  exhibition  and 
not  for  pecuniary  profit  of  the  performers  or  the  manager,  are  not  such  per- 
formances as  are  subject  to  tax. 

Amateur  clubs  or  local  organizations  giving  exhibitions,  even  though 
they  charge  an  admission  price,  are  not  required  to  pay  special  tax  therefor 
if  the  proceeds  are  not  for  pecuniary  profit  of  the  clubs  or  associations,  but 
are  devoted  to  come  charitable  or  public  object  and  payment  of  expenses. 
(Vol.  1,  Treas.  Dec.  (1899),  No.  20840.) 

(90)  Concert   gardens    where   no   admission    fee   is   charged,    but   where 
beer  and  other  drinks  are  sold  and  shows  or  stage  entertainments  are  given, 
are  within  the  meaning  of  this  paragrapk,  and  the  special  tax  of  $10  must 
be  paid  therefor.     (Vol.  2,  Treas.  Dec.  No.  19843.) 

(91)  Exhibitions  and  shows  for  which  special  tax  is  required  to  be  paid. 
(Vol.  2,  Treas.  Dec.    (1898),  Decisions   Nos.  19749,  traveling  shows;  19826- 
19830,  medicine  vender's  show ;  19873,  horse  races ;  19968,  exhibition  at  park 
or  gardens;  19976,  exhibition  or  show  in  a  saloon;  20121,  nickel-in-slot  ma- 
chine, liable  under  certain  conditions;  20190,  exhibitions  by  an  athletic  asso- 
ciation; 20261,  phonograph  parlor;  20270,  concert  hall.) 

(92)  Entertainments   for  which   special  tax  is  not  required  to  be  paid. 
(Vol.  2,  Treas.  Dec.  (1898),  Decisions  Nos.  19752,  amateur  theatricals;  19941, 
halls ;  19977,  lecturers  or  elocutionists ;  20029,  circus  performances  at  county 
fairs;   20115,   merry-go-round;    20123,   illustrated  lectures    (educational   asso- 
ciation exclusively)  ;  20124,  harvest  show;  20165,  fortune  telling;  20228,  foot- 
ball, baseball,  etc.;  20242,  theatrical  entertainment  for  benefit  of  fire  depart- 
ment;   20273,   bands  in   city  parks;    20314,   pianoforte  lecture   recital;    20319, 
store  show   (monkeys)  ;  20337,  university  exhibitions.) 

(93)  Special  tax  is  not  required  to  be  paid  by  proprietors  of  restaurants 
or  cafes  for  employing  bands  of  music  or  orchestras  during  meal  hours  for 
the  benefit  of  their  patrons,  no  admission  price  being  charged  and  no  per- 
formance or  exhibition  being  given  in  connection  therewith.     Former  rulings 
tending  to  a  different  conclusion  modified.     (Vol.  2,  Treas.  Dec.   (1899),  No. 
21522.) 

(94)  An  entertainment  given  by  a  railway  company,  to  which  no  admis- 
sion price  is  charged,  is  not  regarded  as  an  exhibition  or  show  for  money. 
(Vol.  2,  Treas.  Dec.   (1899),  No.  21559.) 

(95)  Special  tax  not  required  for  bands  of  music  playing  in  saloons  to 
which   no   price   of  admission  is   charged,   and   where  persons   visiting  such 
places  are  not  under  any  obligation  to  buy.     (Vol.  2,  Treas.  Dec.  (1899),  No. 
21636.) 

Ninth.    Proprietors  of  bowling  alleys  and  billiard  rooms  shall  pay     Bowling  Alleys, 
$5  for  each  alley  or  table.    Every  building  or  place  where  bowls  are  -defied:  *' 
thrown  or  where  games  of  billiards  or  pool  are  played,  and  that  are 

17 


WAR   REVENUE    LAW 

open  to  the  public  with  or  without  price,  shall  be  regarded  as  a 
bowling  alley  or  a  billiard  room,  respectively. 

(96)  Social  clubs  open  only  to  members  are  not  required  to  pay  special 
tax  on  billiard  tables.     (Circular  No.  508,  Aug.  8,  1898;  vol.  2,  Treas.  Dec., 
No.  19843.) 

(97)  Club  not  required  to  pay  special  tax  on  its  billiard  tables.     (Vol.  2, 
Treas.  Dec.    (1898),  No.  19743.) 

(98)  A  person   for  the  time  being  in  the   possession  and  control  of   a 
billiard  table  in  a  place  or  building  open  to  the  public  is  prima   facie  the 
proprietor  of  a  billiard  room  and  liable  to  pay  the  special  tax  therefor,  even 
if  the  general  property  and  ultimate  control  of  the  table  or  place,  or  either 
of  them,  be  in  some  one  else.     (United  States  v.  Howard,  13  Int.  Rev.  Rec., 
118.) 

(99)  Special-tax   stamp   to    be   issued    for   each   bowling   alley,    pool    or 
billiard  table.     (Vol.  2,  Treas.  Dec.   (1898),  No.  19610.) 

(100)  Bagatelle   table   not   liable  to    special   tax.      (Vol.    2,    Treas.    Dec. 
(1898),  No.  20102.) 

(101)  Tivoli  table  not  liable  to  special  tax.     (Vol.  2,  Treas.  Dec.  (1898), 
No.  20126.) 

(102)  Bowling  alley  at  Sunday-school  picnics  or  at  colleges,  special  tax 
not  required.     (Vol.  2,  Treas.  Dec.   (1898),  Nos.  19890-20021.) 

(103)  When  a  person  who  has  taken  out  a  special-tax  stamp  for  a  bowl- 
ing alley  closes  this  alley  and  thereafter  opens  another  to  the  public,   the 
stamp  may  be  transferred  to  the  latter  bowling  alley  under  the  provisions  of 
section  3241,  Revised   Statutes,   if  it  remains  in  his  ownership  and  control. 
(Vol.  2,  Treas.  Dec.   (1899),  No.  21495.) 

(104)  In  every  building  or  place  where  bowls  are  thrown,  each  division 
or  track  is  a  separate  alley,  for  which  the  special  tax  of  $5  must  be  paid. 
(Vol.  2,  Treas.  Dec.  (1899),  No.  21606.) 

Tenth.  Commission  merchants  shall  pay  $20.  Every  person,  firm, 
or  company  whose  business  or  occupation  it  is  to  receive  into  his  or 
its  possession  any  goods,  wares,  or  merchandise  to  sell  the  same  on 
commission  shall  be  regarded  as  a  commission  merchant: 

Provided,  That  any  person  having  paid  the  special  tax  as  a  com- 
mercial broker  shall  not  be  required  to  pay  the  special  tax  as  a  com- 
mission merchant : 

Provided  junther,  That  this  provision  shall  not  apply  to  commis- 
sion houses  run  upon  a  cooperative  plan. 

Not  taxed  under  act  June  30,  1909 ;  hence  no  Treasury  Decisions  thereon. 

TOBACCO  DEALERS  AND  MANUFACTURERS 

SEC.  4.  That  on  and  after  November  first,  nineteen  hundred  and 
fourteen,  special  taxes  on  tobacco  dealers  and  manufacturers  shall 
be  and  hereby  are  imposed  annually  as  follows,  the  amount  of  such 
annual  taxes  to  be  computed  in  all  cases  on  the  basis  of  the  annual 
sales  for  the  preceding  fiscal  year : 

Leaf  Tobacco  Dealers  in  leaf  tobacco  whose  annual  sales  or  transfers  do  not 
annual8  salts  X-  exceed  fifty  thousand  pounds  shall  each  pay  $6.  Dealers  in  leaf 
ceed  1,000  ibs.  tobacco  whose  annual  sales  or  transfers  exceed  fifty  thousand  and 

18 


WAR    REVENUE    LAW 


do  not  exceed  one  hundred  thousand  pounds  shall  pay  $12,  and  if 
their  annual  sales  or  transfers  exceed  one  hundred  thousand  pounds 
shall  pay  $24: 

Provided,  That  dealers  in  leaf  tobacco  whose  annual  sales  or 
transfers  do  not  exceed  one  thousand  pounds  shall  be  exempt  from 
the  tax  herein  imposed  on  dealers  in  leaf  tobacco. 

Dealers  in  tobacco,  not  specially  provided  for  in  this  section, 
whose  annual  receipts  from  the  sale  of  tobacco  exceed  $200,  shall 
each  pay  $4.80  for  each  store,  shop,  or  other  place  in  which  tobacco 
in  any  form  is  sold. 

Every  person  whose  business  it  is  to  sell,  or  offer  for  sale,  manu- 
factured tobacco,  snuff,  cigars,  or  cigarettes  shall  be  regarded  as  a 
dealer  in  tobacco : 

Provided,  That  no  manufacturer  of  tobacco,  snuff,  cigars,  or 
cigarettes  shall  be  required  to  pay  a  special  tax  as  a  dealer  in 
manufactured  tobacco,  snuff,  cigars,  or  cigarettes  for  selling  his 
own  products  at  the  place  of  manufacture. 

Manufacturers  of  tobacco  whose  annual  sales  do  not  exceed  one 
hundred  thousand  pounds  shall  each  pay  $6. 

Manufacturers  of  tobacco  whose  annual  sales  exceed  one  hundred 
thousand  and  do  not  exceed  two  hundred  thousand  pounds  shall 
each  pay  $12. 

Manufacturers  of  tobacco  whose  annual  sales  exceed  two  hundred 
thousand  and  do  not  exceed  four  hundred  thousand  pounds  shall 
each  pay  $24. 

Manufacturers  of  tobacco  whose  annual  sales  exceed  four  hundred 
thousand  and  do  not  exceed  one  million  pounds  shall  each  pay  $60. 

Manufacturers  of  tobacco  whose  annual  sales  exceed  one  million 
and  do  not  exceed  five  million  pounds  shall  each  pay  $300. 

Manufacturers  of  tobacco  whose  annual  sales  exceed  five  million 
and  do  not  exceed  ten  million  pounds  shall  each  pay  $600. 

Manufacturers  of  tobacco  whose  annual  sales  exceed  ten  million 
and  do  not  exceed  twenty  million  pounds  shall  each  pay  $1,200. 

Manufacturers  of  tobacco  whose  annual  sales  exceed  twenty  mil- 
lion pounds  shall  each  pay  $2,496. 

Manufacturers  of  cigars  whose  annual  sales  do  not  exceed  one 
hundred  thousand  cigars  shall  each  pay  $3. 

Manufacturers  of  cigars  whose  annual  sales  exceed  one  hundred 
thousand  and  do  not  exceed  two  hundred  thousand  cigars  shall  each 
pay  $6. 

Manufacturers  of  cigars  whose  annual  sales  exceed  two  hundred 
thousand  and  do  not  exceed  four  hundred  thousand  cigars  shall  each 
pay  $12. 

Manufacturers  of  cigars  whose  annual  sales  exceed  four  hundred 
thousand  and  clo  not  exceed  one  million  cigars  shall  each  pay  $30. 

Manufacturers  of  cigars  whose  annual  sales  exceed  one  million 
and  do  not  exceed  five  million  cigars  shall  each  pay  $150. 

Manufacturers  of  cigars  whose  annual  sales  exceed  five  million 
and  do  not  exceed  twenty  million  cigars  shall  each  pay  $600. 

Manufacturers  of  cigars  whose  annual  sales  exceed  twenty  million 
and  do  not  exceed  forty  million  cigars  shall  each  pay  $1,200. 

19 


Dealers  whose 
annual  sales  less 
than  1,000  Ibs. 
e  x  e  m  pt  from 
tax. 

Dealers  in  to- 
bacco whose  an- 
nual receipts  ex- 
ceed $200. 


Dealers  —  de- 
nned. 


No  manufac- 
turer shall  be 
taxed  as  a 
dealer. 

Manufacturers 
of  tobacco. 


Manufacturers- 
of   cigars. 


WAR    REVENUE    LAW 


Manufacturers 
of  cigarettes. 


Manufacturer 
—denned. 


Penalty 
failure  to 
tax. 


for 
pay 


Manufacturers  of  cigars  whose  annual  sales  exceed  forty  million 
cigars  shall  each  pay  $2,496. 

Manufacturers  of  cigarettes  whose  annual  sales  do  not  exceed  one 
million  cigarettes  shall  each  pay  $12. 

Manufacturers  of  cigarettes  whose  annual  sales  exceed  one  million 
and  do  not  exceed  two  million  cigarettes  shall  each  pay  $24. 

Manufacturers  of  cigarettes  whose  annual  sales  exceed  two  mil- 
lion and  do  not  exceed  five  million  cigarettes  shall  each  pay  $60. 

Manufacturers  of  cigarettes  whose  annual  sales  exceed  five  mil- 
lion and  do  not  exceed  ten  million  cigarettes  shall  each  pay  $120. 

Manufacturers  of  cigarettes  whose  annual  sales  exceed  ten  million 
and  do  not  exceed  fifty  million  cigarettes  shall  each  pay  $600. 

Manufacturers  of  cigarettes  whose  annual  sales  exceed  fifty  mil- 
lion and  do  not  exceed  one  hundred  million  cigarettes  shall  each 
pay  $1,200. 

Manufacturers  of  cigarettes  whose  annual  sales  exceed  one  hun- 
dred million  cigarettes  shall  each  pay  $2,496. 

In  arriving  at  the  amount  of  license  tax  to  be  paid  hereunder, 
and  in  the  levy  and  collection  of  such  tax,  each  person,  firm,  or  cor- 
poration engaged  in  the  manufacture  of  cigars,  cigarettes  (including 
little  cigars),  or  tobacco  shall  be  considered  and  deemed  a  single 
manufacturer. 

And  every  person  who  carries  on  any  business  or  occupation  for 
which  special  taxes  are  imposed  by  this  Act,  without  having  paid 
the  special  tax  herein  provided,  shall,  besides  being  liable  to  the 
payment  of  such  special  tax,  be  deemed  guilty  of  a  misdemeanor,  and 
upon  conviction  thereof  shall  pay  a  fine  of  not  more  than  $500,  or 
be  imprisoned  not  more  than  six  months,  or  both,  at  the  discretion 
of  the  court: 

Provided,  That  the  special  taxes  imposed  by  this  Act  and  pay- 
able during  the  special  tax  year  ending  June  thirtieth,  nineteen  hun- 
dred and  sixteen,  shall  be  collected  and  paid  proportionately  for  the 
period  during  which  such  taxes  shall  remain  in  force  during  said 
year. 

(T.  D.  2061.) 

Emergency  revenue  lain* — Special  tax — Tobacco  dealers  and  manu- 
facturers. 

Regulations  and  information  as  to  certain  requirements  of  act  of  October  22, 
1914,  together  with  synopsis  of  decisions  made  under  the  act  of  June  13,' 
1898,  which  will  be  given  weight  in  determining  similar  questions  arising 
under  the  emergency  revenue  act  of  October  22,  1914. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  November  10,  1914. 

In  answer  to  numerous  inquiries,  the  following  information  as  to  certain 
requirements  of  the  act  of  October  22,  1914,  is  given: 

The  law  provides  that  each  person,  firm,  or  corporation  engaged  in  the 
manufacture  of  cigars,  cigarettes  (including  little  cigars),  or  tobacco  shall 
be  considered  and  deemed  a  single  manufacturer 

Each  manufacturer  of  cigars  therefore  is  required  to  pay  but  one  special 
tax  at  the  appropriate  rate,  no  matter  how  many  factories  are  operated  under 

20 


WAR   REVENUE    LAW 

his  exclusive  ownership  and  control.  Ownership  by  one  corporation  manufac- 
turing cigars,  cigarettes,  or  tobacco  of  a  part  or  all  of  the  stock  of  another 
corporation,  also  bonded  as  a  manufacturer,  is  not  exclusive  ownership  or 
control  of  the  latter,  which  is  a  separate  legal  entity  and  must  pay  a  separate 
special  tax. 

A  corporation  which  is  engaged  in  the  manufacture  of  cigars  and  also  of 
cigarettes  or  tobacco  must  pay  a  separate  special  tax  as  manufacturer  of 
cigars  and  as  manufacturer  of  cigarettes  or  as  manufacturer  of  tobacco,  or 
both,  as  the  case  may  be. 

For  the  purposes  of  calculating  the  rate  of  tax  under  this  act,  all  tobacco 
cigarettes,  commonly  known  as  "little  cigars,"  are  rated  as  cigarettes. 

Where  more  than  one  factory  or  branch  is  operated  by  the  same  manu- 
facturer, the  special  tax  shall  be  paid  to  the  collector  of  the  district  where 
the  principal  factory  or  place  of  business  is  located,  and  the  special  tax 
stamp  will  be  posted  at  such  factory  or  place  of  business.  The  collector  issu- 
ing the  special-tax  stamp  will  also  issue  as  many  certificates  that  the  tax  has 
been  duly  paid  to  him  as  may  be  necessary  to  cover  each  factory  operated 
by  the  tax-payer,  and  one  of  such  certificates  must  be  posted  in  a  conspicuous 
place  at  each  of  such  factories.  In  making  return  for  special  tax  the  man- 
ufacturer will  file  a  sworn  statement  of  production,  including  all  factories 
or  branches,  for  the  preceding  fiscal  year.  The  return  should  state  separately 
the  factory  number,  district,  and  State  as  to  each  factory  operated,  the  out- 
put of  each  factory,  and  the  aggregate  output  of  all  factories  upon  which  the 
special  tax  is  calculated. 

The  law  provides  that  the  amount  of  the  annual  tax  is  to  be  computed 
in  all  cases  on  the  basis  of  the  annual  sales  of  the  preceding  fiscal  year,  and 
the  basis  of  computation  is  the  total  sales  during  the  year,  whether  business 
is  conducted  during  the  whole  or  only  a  part  of  the  year. 

Dealers  or  manufacturers  who  were  not  engaged  in  such  business  during 
the  preceding  fiscal  year  must  procure  special-tax  stamps  before  commencing 
business.  The  special-tax  stamp  purchased  at  the  commencement  of  busi- 
ness may  be  of  such  grade  as,  in  the  opinion  of  the  dealer  or  manufacturer, 
may  be  required  to  cover  his  business  for  the  fiscal  year,  but  when  the  limit 
of  sales  allowed  under  such  stamp  is  reached,  the  dealer  or  manufacturer 
must  procure  a  stamp  of  a  higher  grade,  so  that  his  liability  to  special  tax 
on  the  basis  of  sales  as  provided  by  law  will  at  all  times  be  covered. 

Peddlers  of  tobacco,  whose  annual  receipts  exceed  $200,  are  liable  to 
special  tax  at  the  rate  of  $4.80  per  annum.  The  special-tax  stamp  in  such 
cases,  like  special-tax  stamps  for  dining  cars,  will  cover  sales  made  in  the 
United  States  and  should  be  carried  by  the  peddler  on  his  person,  or  posted 
in  his  wagon,  or  other  conveyance,  if  he  has  one. 

Return  for  register,  Form  277,  should  be  made  and  certificate  of  registry 
should  be  issued  only  in  the  case  of  dealers  in  leaf  tobacco,  including  retail 
dealers  in  leaf  tobacco,  whose  sales  do  not  exceed  1,000  pounds  and  who 
are  exempt  from  special  tax. 

Dealers  in  tobacco  and  dealers  in  leaf  tobacco,  including  retail  dealers  in 
leaf  tobacco  claiming  exemption  from  special  tax  under  the  provisions 
of  this  act,  will  be  required  to  establish  same  under  oath. 

Attached  hereto  is  published  for  the  guidance  and  information  of  all 
concerned  a  synopsis  of  decisions  made  under  the  act  of  June  13,  1898,  which 
will  be  given  considerable  weight  in  determining  similar  questions  arising 
under  the  present  act. 

W.  H.  OSBORN, 

Commissioner  of  Internal  Revenue. 
Approved. 

W.  G.  McAooo, 

Secretary  of  the  Treasury. 


(1)  A  manufacturer  of  tobacco  or  cigars  can  not  sell  at  retail  at  place 
of  manufacture.      (16  Op.  Atty.  Gen.,  89;   24  Int.   Rev.   Rec.,   227;    Crisp  v. 
Proud,  24  ibid.,  340;  Ludlofif  v.  United  States,  108  U.  S.,  176;  29  Int.  Rev. 
Rec.,  125.) 

(2)  Special  tax  liability  of  a  person  buying  leaf  tobacco  exclusively  for 
export  by  himself.     (T.  D.  28.) 

21 


WAR    REVENUE    LAW 

(3)  Liability  to  special  tax  of  tobacco  dealers  and  manufacturers  under 
the  act  of  June  13,  1898.     (T.  D.  138.) 

(4)  As  to  the  penalty  for  failure  to  make  return  on  Form  11  of  special 
taxes  incurred.     (T.  D.  19748.) 

(5)  Manufacturers   can  not  pack  goods   of  another   factory   on  goods 
made   at   their   own    factory.      Manufacturers    selling   their   own   products   at 
place  of  manufacture  not  required  to  pay  special  tax  as  dealers  in  tobacco. 
Manufacturers  are  not  permitted  to  pack  stamped  packages  of  smoking  to- 
bacco or  stamped  caddies  of  plug  tobacco  between  the  chime  and  the  head 
or  bottom  of  such  packages.     (T.  D.  19765.) 

(6)  Dealers  in  leaf  tobacco  who  improperly  qualify  as  manufacturers  of 
cigars  for  the  purpose  of  dealing  in  cigar  cuttings,  and  who  made  no  cigars 
last  year,  are  not  liable  to  special  tax  as  manufacturers  of  cigars,  but  such 
persons  will  be  required  to  close  their  business  as  cigar  manufacturers  and 
may  qualify  as  manufacturers  of  tobacco.     (T.  D.  19801.) 

(7)  Dealers  in   leaf  tobacco,   and   manufacturers   of  tobacco   or   cigars, 
who  were  not  engaged  in  business  last  fiscal  year,  required  on  commencing 
business   to   pay   minimum   rate   of    special   tax,    and    when    sales    during   the 
year   reach  an  amount   requiring  payment  of   higher   rate,   will  make   return 
and  pay  tax  at  the  higher  rate.     (T.  D.  19822.) 

(8)  Persons  who  have  qualified  as   manufacturers   of   tobacco   for  the 
sole  purpose  of  handling  and  dealing  in  stems,  refuse  scraps,  cuttings,  clip- 
pings, and  sweeping  of  tobacco  are  required  to  register  and  pay  the  minimum 
rate  of  special  tax  imposed  on  manufacturers  of  tobacco.     (T.  D.  19844.) 

(9)  Manufacturers  of  tobacco,  snuff,  or  cigars  may,  under  special  per- 
mit,    *     *     *     sell   stemmed   or   unstemmed   leaf   tobacco   to    other   qualified 
manufacturers  of  tobacco,  snuff,  _  or  cigars  without  being  required  to  register 
and  pay  special  tax  as  dealers  in    (leaf)    tobacco.     Special  permits  are  only 
granted  when  it  is  ascertained  that  the  manufacturer  has  material  on  hand 
which  he  finds  not  suitable  for  his  business.     (T.  D.  19876.) 

(10)  A  farmer  who  sells  and  delivers  leaf  tobacco  of  his  own  raising 
is  not  required  to  make  return  or  pay  special  tax  as  dealer  in  leaf  tobacco. 
(T.  D.  19962.) 

(11)  Auction  sales  of  tobacco  in  warehouses,   or  at  "tobacco  breaks," 
subject  to  tax  same  as  upon  sales  of  "any  products  or  merchandise  at  any 
exchange  or  board  of  trade,  or  other  similar  place."     (T.  D.  19972.) 

(12)  No  provision  of  law  by  which  a  special-tax   stamp  issued  to  one 
person  can  be  transferred  to  and  made  use  of  by  any  other  person,  except 
in  the  single  instance  of  the  death  of  the  special-tax   payer,   expressly  pro- 
vided for  by  section  3241.  Revised  Statutes.     (T.  D.  20153.) 

(13)  Where  farmer  or  producer  brings  product  to  market  and  sells  it 
in  his  own  name  through  an  auctioneer,  the  sales  will  come  within  the  scope 
of  a  sale  made  at  an  auction  house,  and  stamp  tax  and  memorandum  of  sale 
is  not  required.     (T.  D.  20236.) 

(14)  Under  existing  law  the  farmer  or  grower  of  tobacco  has  the  right 
to  sell  tobacco  of  his  own  growth  and  raising  to  any  person  and  in  any  quan- 
tity which  may  be  desired,  provided  its  condition  has  not  been  changed  in  any 
manner.     This  is  a  personal  privilege  and  can   not  be   delegated  by  him  to 
another  person.     The  farmer  can  not  employ  another  person  to  travel  from 
place  to  place  to  sell  and  deliver  tobacco  to  consumers,  nor  has  he  the  right 
to  place  the  tobacco  in  the  hands  of  another  person  to  be  sold   for  him  to 
consumers,  but  he  may  place  it  in  the  hands  of  a  qualified  dealer  in  leaf  to-  - 
bacco  to  be  sold  on   commission  to  other  qualified   dealers,   or  to  manufac- 
turers of  tobacco  or  cigars,  or  to  persons  who  buy  leaf  tobacco  in  nackae'es 
for  export.     (T.  D.  20482.) 

(15)  Warehousemen  who  sell  leaf  tobacco  on  commission  are  required 
to  pay  special  tax  as  leaf  tobacco  dealers;  and  if  they  neither  acquire  posses- 
sion of,  nor  right  or  title  to,  leaf  tobacco,  which  they  sell  on  commission  as 

for   others,   they  must   also   pay   special   tax   as    commercial   brokers. 

.  ) 


(16)  A  manufacturer  purchasing  large  quantities  of'  leaf  tobacco,  ex- 
ceeding the  demands  of  his  factory,  for  the  purpose  of  reselling  his  surplus 
to  other  manufacturers,  must  be  regarded  as  engaged  in  and  carrying 


on 


WAR   REVENUE    LAW 

the  business  of  a  dealer  in  leaf  tobacco,  and  will  be  required  to  make  return 
and  pay  special  tax  as  dealer  in  leaf  tobacco  at  some  place  not  connected 
with  the  factory.  (T.  D.  20605.) 

(17)  Dealers  in  leaf  tobacco  who  have  several  warehouses  at  which 
they  receive  tobacco,  and  from  which  the  same  is  delivered  to  the  purchaser, 
required  to  pay  special  tax  at  each  place.  (T.  D.  20638.) 

The    imposing    an   additional    tax   on    tobacco    on    which    the    tax   had 
already  been  paid  is  constitutional.     Patton  v.  Brady,  184  U.  S.,  616. 

ADHESIVE  STAMPS 

SEC.  5.     That  on  and  after  the  first  day  of  December,  nineteen       Tax  on  bonds, 
hundred  and  fourteen,  there  shall  be  levied,  collected,  and  paid,  for   cates?  ^tc.06' 
and  in  respect  of  the  several  bonds,  debentures,  or  certificates  of 
stock  and  of  indebtedness,  and  other  documents,  instruments,  mat- 
ters, and  things  mentioned  and  described  in  Schedule  A  of  this  Act, 
or  for  or  in  respect  of  the  vellum,  parchment,  or  paper  upon  which 
such  instruments,  matters,  or  things,  or  any  of  them,  shall  be  written 
or  printed  by  any  person  or  persons,  or  party  who  shall  make,  sign,    .  By  whom  paid, 
or  issue  the  same,  or  for  whose  use  or  benefit  the  same  shall  be  made, 
signed,  or  issued,  the  several  taxes  or  sums  of  money  set  down  in 
figures  against  the  same,  respectively,  or  otherwise  specified  or  set 
forth  in  the  said  schedule. 

REGULATIONS. 

Section  5  of  the  act  of  October  22,  1914,  provides  under  the  title  of  ad- 
hesive stamps,  for  the  collection,  on  and  after  December  1,  1914,  of  certain 
taxes  on  documents,  instruments,  and  things  mentioned  and  described  in 
Schedule  A  of  said  act,  as  follows  : 

STAMP  DUTIES  ON  AND  AFTER  DECEMBER  1,  1914. 
Schedule  A. — Documentary. 

1.  Bonds,  debentures,  or  certificates  of  indebtedness  of  any  associa- 

tion,  company,   or   corporation,   on  each   $100   of   face  value   or 
fraction    thereof    $0.05 

2.  On  each  original  issue  of  certificates  of  stock,  whether  on  organi- 

zation  or  reorganization,   on   each   $100  of   face   value   or   frac- 
tion   thereof    ^ 05 

On  all  sales,  agreements  to  sell,  memoranda  of  sales,  deliveries  or 
transfers  of  shares,  or  certificates  of  stock  of  any  association  or 
corporation,  on  each  $100  of  face  value  or  fraction  thereof 02 

3.  Upon   each   sale,  agreement  to  sell,   or  agreement  of  sale  of  any 

products  or  merchandise  at  any  exchange  or  board  of  trade,  for 

future  delivery,  for  each  $100  in  value  of   said  sale 01 

And  for  each  $100  or  fractional  part  thereof  in  excess  of  $100. . .     .01 

4.  Promissory  notes   (except  bank  notes  issued  for  circulation),  and 

for  each  renewal  of  same,  for  a  sum  not  exceeding  $100 02 

And  for  each  additional  $100,  or  fractional  part  thereof,  in  excess 
of  $100  02 

5.  Bills  of   lading,  manifests,   etc.,   issued  by  express   companies,   or 

public  carriers,  etc.,  where  a  charge  exceeding  5  cents  is  made,  a 
stamp  to  each  of  the  value  of 01 

6.  Bond,  indemnifying,  etc.   (except  those  required  in  legal  proceed- 

ings),   not    otherwise   provided    for 50 

7.  Certificates    of    profits,    or    certificates    or    memoranda    showing 

interest   in    the   property   or   accumulations    of   any   association, 
company,  or  corporation,  and  all  transfers  thereof,  on  each  $100 

of  face  value   or   fraction  thereof 02 

23 


WAR   REVENUE    LAW 

8     Certificates  of  damage,  or  otherwise,  and  all  other  certificates  or 

documents   issued  by  port  warden  or  marine   surveyor. .......     .~o 

9.    Certificates    of    any    description    required    by    law,    not    otherwis< 

specified /  ' '  '1 ' ' '  r J 

10  Contract,  broker's  note,  or  memorandum  of  sale  ot  goods,  o 

chandise,  stock,  bonds,  exchange,  notes  of  hand,  real  estate,  or 
property  of  any  kind,  issued  by  brokers,  etc.,  for  each  note  or 
memorandum  of  sale  not  otherwise  provided  for 10 

11  Conveyance— deed,  instrument,   or  writing  conveying  lands,  tene- 

ments   or  other  realty,  etc.,  value  over  $100  and  not  exceeding 

$500    •  • 50 

For  each  additional  $500  or  fraction  thereof 50 

12.  Entry  of  goods,  wares,  and  merchandise  in  customhouse,  not  ex- 

ceeding $100  in  value 25 

Exceeding  $100  and  not  exceeding  $500 50 

Exceeding  $500   in  value l-°° 

13.  Entry    for   withdrawal    of    goods    or    merchandise    from    customs 

bonded    warehouse     50 

14.  Insurance,    marine,    inland    and    fire    or    lightning    (except    purely 

co-operative  or  mutual),  on  each  policy,  or  renewal,  on  amount 

of  premium  charged  on  each  $1  or  fractional  part 00^ 

15.  Insurance,  casualty,  fidelity,  and  guarantee,  on  each  policy,  on  each 

$1   or  fractional  part  thereof  of  premium   charged 00 V2 

16.  Passage  ticket,  for  each  passenger  sold  in  the  United  States   for 

passage  by  any  vessel  to  a  foreign  port  or  place,  cost  not  ex- 
ceeding $30  1-00 

More  than  $30  and  not  exceeding  $60 3.00 

More    than    $60 5.00 

Cost  not  exceeding  $10  exempt. 

17.  Power  of  attorney  or  proxy  for  voting  at  an  election  for  officers 

of  any  incorporated  company  or  association,  except  religious, 
charitable,  literary  societies,  or  public  cemeteries 10 

18.  Power  of  attorney  to  sell  or  convey  real  estate  or  to  rent  or  lease 

the   same,  to  collect  or  receive  rent,   to  sell  or  transfer  stock, 

bonds,    etc 25 

(Papers  used  in  the  collection  of  pension,  back  pay, 'or  bounty 
claims,  or  claims  for  property  lost  in  military  or  naval  service 
are  exempt.) 

19.  Protest:    Upon  the  protest  of  every  note,  bill  of  exchange,  accept- 

ance, check,  or  draft,  or  any  marine  protest 25 

20.  Telegraph   and  telephone   messages :     Every  person,   firm,   or   cor- 

poration operating  any  telephone  line  or  lines  is  required  to  - 
make,  within  30  days  after  the  expiration  of  each  month,  a  sworn 
statement  to  the  collector  of  the  number  of  messages  or  con- 
versations transmitted  over  their  lines  during  preceding  month 
for  which  a  charge  of  15  cents  or  more  was  imposed,  and  for 
each  of  such  messages  or  conversations  a  tax  shall  be  paid  of..  0.01 

21.  Every  seat  sold  in  a  palace  or  parlor  car  and  every  berth  sold  in  a 

sleeping  car,  to  be  paid  by  the  company  selling  the  same 01 

Under  authority  conferred  upon  the  Commissioner  of  Internal  Revenue 
in  section  22  of  said  act,  the  following  adhesive  stamps  have  been  prepared: 

Documentary  stamps,  Schedule  A. — */2  cent,  1  cent,  2  cents,  3  cents,  4 
cents,  5  cents,  10  cents,  25  cents,  40  cents,  50  cents,  80  cents,  $1,  $2,  $3,  $5, 
$10,  $30,  $50,  $100,  $500,  $1,000. 

Procurement  of  Adhesive  Stamps. 

All  of  the  above  stamps  may  be  purchased  from  collectors  and  deputy 
collectors  of  internal  revenue. 

In  addition,_  provision  has  been  made  in  the  act  for  the  delivery  of  stamps 
by  collectors  _  without  prepayment  to  any  Assistant  Treasurer  of  the  United 
States,  depository  of  the  United  States,  or  postmaster,  who  may  be  required 
to  give  bond  for  the  value  of  stamps  deposited  with  him.  It  is  not  manda- 
tory upon  the  persons  named  to  make  the  required  bond  and  secure  the 

24 


WAR   REVENUE    LAW 

stamps.  When  stamps  are  so  furnished  without  prepayment,  the  post- 
master or  other  officer  is  not  entitled  to  any  discount,  but  discount  of  1  per 
cent  will  be  allowed  to  those  who  purchase  to  the  amount  of  $100  of  face 
value  at  one  time,  paying  cash  therefor  at  the  time  of  purchase  or  receipt, 
either  from  the  collector  or  the  persons  with  whom  stamps  have  been  de- 
posited without  prepayment  as  noted  in  the  foregoing. 

Stamps  to  be  affixed  to  articles  manufactured  in  a  foreign  country  and 
imported  into  the  United  States  may  be  purchased  and  forwarded  to  the  place 
of  manufacture  and  there  affixed  to  the  articles  before  the  same  are  packed 
for  importation. 

And  there  shall  also  be  levied,  collected,  and  paid,  for  and  in      On   perfumes, 
respect   to   the   preparations,   matters,   and   things   mentioned   and   c        lcs>  etc> 
described  in  Schedule  B  of  this  Act,  manufactured,  sold,  or  removed 
for  sale,  the  several  taxes  or  sums  of  money  set  down  in  words  or 
figures  against  the  same,  respectively,  or  otherwise  specified  or  set 
forth  in  Schedule  B  of  this  Act. 

SEC.  6.  That  if  any  person  or  persons  shall  make,  sign,  or  issue,  or  fa£uern ^7tamp! 
cause  to  be  made,  signed,  or  issued,  any  instrument,  document,  or 
paper  of  any  kind  or  description  whatsoever,  without  the  same  being 
duly  stamped  for  denoting  the  tax  hereby  imposed  thereon,  or  with- 
out having  thereupon  an  adhesive  stamp  to  denote  said  tax,  such 
person  or  persons  shall  be  deemed  guilty  of  a  misdemeanor,  and 
upon  conviction  thereof  shall  pay  a  fine  of  not  more  than  $100,  at 
the  discretion  of  the  court. 

SEC.  7.    That  if  any  person  shall  forge  or  counterfeit,  or  cause  or      penalty   for 
procure  to  be   forged  or  counterfeited,  any   stamp,  die,  plate,  or   terfeftmg^tamps 
other  instrument,  or  any  part  of  any  stamp,  die,  plate,  or  other  in-   and  d*es-  etc- 
strument  which  shall  have  been  provided,  or  may  hereafter  be  pro- 
vided, made,  or  used  in  pursuance  of  this  Act,  or  shall  forge,  coun- 
terfeit, or  resemble,  or  cause  or  procure  to  be  forged,  counterfeited, 
or  resembled,  the  impression,  or  any  part  of  the  impression,  of  any 
such  stamp,  die,  plate,  or  other  instrument,  as  aforesaid,  upon  any 
vellum,  parchment,  or  paper,  or  shall  stamp  or  mark,  or  cause  or 
procure  to  be  stamped  or  marked,  any  vellum,  parchment,  or  paper 
with  any  such  forged  or  counterfeited  stamp,  die,  plate,  or  other 
instrument,  or  part  of  any  stamp,  die,  plate,  or  other  instrument,  as 
aforesaid,  with  intent  to  defraud  the  United  States  of  any  of  the 
taxes  hereby  imposed,  or  any  part  thereof;  or  if  any  person  shall 
utter,  or  sell,   or  expose   for  sale,  any  vellum,   parchment,  paper, 
article,  or  thing  having  thereupon  the  impression  of  any  such  coun- 
terfeited  stamp,   die,   plate,   or  other   instrument,   or   any  part   of      impressions  of 
any   stamp,   die,   plate,  or  other  instrument,   or  any   such   forged,   stamPs  or  dies- 
counterfeited,  or  resembled  impression,  or  part  of  impression,  as 
aforesaid,  knowing  the  same  to  be  forged,  counterfeited,  or  resem- 
bled; or  if  any  person  shall  knowingly  use  or  permit  the  use  of 
any  stamp,  die,  plate,  or  other  instrument,  which  shall  have  been 
so  provided,  made,  or  used  as  aforesaid,  with  intent  to  defraud  the 
United  States ;  or  if  any  person  shall  fraudulently  cut,  tear,  or  re-      Sale  of  p.aP.er> 

,  j      .«  etc.,     containing 

move,  or  cause  or  procure  to  be  cut,  torn,  or  removed,  the  impres-   forged  stamps  or 
sion   of   any   stamp,    die,   plate,   or   other   instrument   which   shall 
have  been  provided,  made,  or  used  in  pursuance  of  this  Act  from  any 
vellum,  parchment,  or,  paper,  or  any  instrument  or  writing  charged  or 

25 


WAR   REVENUE   LAW 


Removing   im- 
pressions etc. 


Use  of  washed 

or  restored 
stamps. 


Possession  of 
washed  or  re- 
stored stamps. 


Punishment. 


Cancellation  of 
stamps  by  user. 


Penalty 
failure. 


for 


chargeable  with  any  of  the  taxes  imposed  by  law ;  or  if  any  person 
shall  fraudulently  use,  join,  fix,  or  place,  or  cause  to  be  used,  joined, 
fixed,  or  placed,  to,  with,  or  upon  any  vellum,  parchment,  paper,  or 
any  instrument  or  writing  charged  or  chargeable  with  any  of  the 
taxes  hereby  imposed,  any  adhesive  stamp,  or  the  impression  of  any 
stamp,  die,  plate,  or  other  instrument,  which  shall  have  been  pro- 
vided,'made,  or  used  in  pursuance  of  law,  and  which  shall  have  been 
cut,  torn,  or  removed  from  any  other  vellum,  parchment,  or  paper, 
or  any  instrument  or  writing  charged  or  chargeable  with  any  of  the 
taxes  imposed  by  law;  or  if  any  person  shall  willfully  remove  or 
cause  to  be  removed,  alter  or  cause  to  be  altered,  the  canceling  or 
defacing  marks  of  any  adhesive  stamp  with  intent  to  use  the  same, 
or  to  cause  the  use  of  the  same,  after  it  shall  have  been  once  used, 
or  shall  knowingly  or  willfully  sell  or  buy  such  washed  or  restored 
stamp,  or  offer  the  same  for  sale,  or  give  or  expose  the  same  to  any 
person  for  use,  or  knowingly  use  the  same,  or  prepare  the  same  with 
intent  for  the  further  use  thereof ;  or  if  any  person  shall  knowingly 
and  without  lawful  excuse  (the  proof  whereof  shall  lie  on  the  per- 
son accused)  have  in  his  possession  any  washed,  restored,  or  altered 
stamp  which  has  been  removed  from  any  vellum,  parchment,  paper, 
instrument,  or  writing,  then,  and  in  every  such  case,  every  person 
so  offending,  and  every  person  knowingly  and  willfully  aiding,  abet- 
ting, or  assisting  in.  committing  any  such  offenses  as  aforesaid  shall 
be  deemed  guilty  of  a  misdemeanor,  and,  upon  conviction  thereof, 
shall  forfeit  the  said  counterfeit  stamps  and  the  articles  upon  which 
they  are  placed,  and  shall  be  punished  by  fine  not  exceeding  $1,000, 
or  by  imprisonment  and  confinement  at  hard  labor  not  exceeding 
five  years,  or  both,  at  the  discretion  of  the  court. 

SEC.  8.  That  in  any  and  all  cases  where  an  adhesive  stamp  shall 
be  used  for  denoting  any  tax  imposed  by  this  Act,  except  as  herein- 
after provided,  the  person  using  or  affixing  the  same  shall  write  or 
stamp  thereupon  the  initials  of  his  name  and  the  date  upon  which 
the  same  shall  be  attached  or  used,  so  that  the  same  may  not  again 
be  used.  And  if  any  person  shall  fraudulently  make  use  of  an  adhe- 
sive stamp  to  denote  any  tax  imposed  by  this  Act  without  so  effect- 
ually canceling  and  obliterating  such  stamp,  except  as  before  men- 
tioned, he,  she,  or  they  shall  be  deemed  guilty  of  a  misdemeanor, 
and  upon  conviction  thereof  shall  pay  a  fine  of  not  exceeding  $500, 
or  be  imprisoned  not  more  than  six  months,  or  both,  at  the  discre- 
tion of  the  court : 


Cancellation  of  Documentary  Stamps. 

In  any  and  all  cases  where  an  adhesive  stamp  shall  be  used  for  denoting 
any  tax  imposed  by  Schedule  A  of  the  act  of  October  22,  1914,  the  person 
using  or  affixing  the  same  shall  write  or  stamp  thereon,  with  ink,  the  initials 
of  his  name  and  the  date  (year,  month,  and  day)  in  which  the  same  shall  be 
attached  or  used;  or  shall,  by  cutting  and  canceling  said  stamp  with  a  ma- 
chine or  punch,  which  will  affix  the  initials  and  date  as  aforesaid,  so  deface 
the  stamp  as  to  render  it  unfit  for  reuse.  The  cancellation  by  either  method 
should  not  so  deface  the  stamp  as  to  prevent  its  denomination  and  genuine- 
ness from  being  readily  determined. 

In  addition  to  the  foregoing,  stamps  of  the  value  of  10  cents  or  more 

26 


WAR    REVENUE    LAW 

shall  have  three  parallel  incisions  made  by  some  sharp  instrument  length- 
wise through  the  stamp  after  the  stamp  has  been  attached  to  the  document : 
Provided,  This  will  not  be  required  where  stamps  are  canceled  by  per- 
foration. , 

Documentary  Stamps. 

1.  Documentary  revenue  stamps  issued  prior  to  October  22,  1914,  under 
former  revenue  laws  can  not  be  used  for  the  payment  of  taxes  required  by 
existing  law,  and  the  redemption  or  exchange  of  such  old  stamps  is  prohibited 
by  statute. 

2.  Ordinary  postage   stamps   can  not  be   used   for  the  payment  of   any 
internal-revenue  taxes. 

As  adhesive  stamps  may  be  sold  by  any  person  and  readily  pass  at  their 
face  value  in  the  market,  provision  has  not  been  made  for  their  exchange  or 
redemption  by  the  Government.  Where,  however,  such  stamps  are  rendered 
useless  by  gumming  or  sticking  together  in  transit  or  otherwise  without  the 
fault  of  the  purchaser,  they  may  be  exchanged  by  a  collector  for  other  stamps 
of  exactly  the  same  quantity  and  denomination. 

4.  Documentary  and   proprietary   stamps   can  not  be   used   interchange- 
ably.    Documentary  stamps  only  must  be  used  upon  papers,  documents,  and 
instruments  subject  to  tax  as  provided  in  Schedule  A. 

5.  Where  a  stamp  of  the  proper  denomination  to  pay  the  tax  due  on  an 
article  or  document  can  not  be  procured,  two  or  more  stamps  may  be  used. 
In  such  case  as  few  stamps  as  possible  should  be  attached,  and  each  stamp 
used   should  be   canceled  in   the  manner  provided   by  regulation. 

W.  H.  OSBORN, 

Commissioner  of  Internal  Revenue. 
Approved : 

BYRON  R.  NEWTON, 

Acting  Secretary  of  the  Treasury. 

Provided,  That  instead  of  cancellation  by  initials  and  date,  the 
stamps  on  the  articles  enumerated  in  Schedule  B  shall  be  so  affixed 
on  the  box,  bottle,  or  package  that  in  opening  the  same,  or  using  the 
contents  thereof,  the  said  stamp  shall  be  effectually  destroyed;  and 
in  default  thereof  the  party  making  default  shall  be  liable  to  the 
same  penalty  imposed  for  neglect  to  affix  said  stamp. as  hereinbefore 
prescribed  in  this  Act. 

Affixing  Stamps. 

Section  8  provides  that  instead  of  cancellation  by  initials  and  date,  the 
stamps  on  the  articles  enumerated  in  Schedule  B  shall  be  so  affixed  on  the 
box,  bottle,  or  package  that  in  opening  the  same  or  using  the  contents 
thereof  the  said  stamp  shall  be  effectually  destroyed,  but  section  22  author- 
izes the  Commissioner  of  Internal  Revenue  to  prescribe  such  method  of 
cancelling  stamps  as  he  may  deem  expedient  in  lieu  of  the  method  provided 
in  the  act.  In  pursuance  of  this  requirement,  where  articles  are  sold  to  the 
public  in  boxes,  bottles,  tins,  or  other  similar  packages  without  any  other 
covering,  the  stamp  shall  be  so  affixed  to  the  box.  bottle,  tin,  or  other  package 
of  such  character  that  in  opening  the  same  the  stamp  will  be  destroyed. 
Wliere  the  boxes,  bottles,  tins  or  other  containers  are  usually  offered  to  the 
public  in  wrappers  or  cartons,  the  stamp  shall  be  affixed  in  such  manner  as  to 
seal  the  wrapper  or  carton.  In  case  of  double-end  cartons,  the  stamps  shall  be 
affixed  to  the  top  end  lapping  over  on  the  side. 

There  are  some  articles  not  usually  offered  to  the  public  in  cartons, 
containing  patent  stoppers,  etc.,  which  make  it  impossible  to  affix  a  stamp  in 
the  manner  provided  by  law.  Where  it  is  clearly  impracticable  to  affix  the 
stamp  so  that  it  will  be  destroyed  in  using  the  contents,  the  stamp  may  be 
affixed  upon  one  side  or  the  bottom  of  the  bottle. 

Where  articles  subject  to  tax  are  usually  displayed  for  sale  in  fancy  or 
expensive  outer  cases  or  containers  to  which  it  is  impossible,  without  marring 

27 


WAR    REVENUE    LAW 


Promissory 
note  or  bill  of 
exchange,  giving 
and  acceptance 
of,  prohibited 
unless  stamped. 


Penalty. 


Sale  of  stamps 
by  postmaster, 
etc. 

Furnished 
without  prepay- 
ment of  costs. 


Regulations. 


Register,  sale 
and  transfer  of 
unstamped  in- 
struments, etc., 
forbidden. 


Penalty. 


the  container,  to  affix  the  stamp  in  such  manner  as  to  break  it  on  opening, 
the  stamp  may  be  affixed  in  such  place  as  will  not  mar  the  appearance  of  the 

Where  articles  are  usually  offered  for  sale  in  small  containers  mounted 
on  cards,  the  stamp  covering  all  articles  affixed  may  be  attached  to  the 

Where  several  articles,  all  taxable  or  some  taxable  and  some  untaxable, 
are  packed  together  for  sale  as  entireties,  the  stamp  covering  the  tax  on  the 
taxable  contents  may  be  placed  on  the  container. 

In  all  cases  where  the  stamps  are  not  so  affixed  as  to  be  broken  when 
the  container  is  opened,  the  stamp  shall  be  canceled  with  the  initials  of  the 
manufacturer  and  the  month  and  year. 

SEC.  9.  That  if  any  person  or  persons  shall  make,  sign,  or  issue, 
or  cause  to  be  made,  signed,  or  issued,  or  shall  accept  or  pay,  or 
cause  to  be  accepted  or  paid,  with  design  to  evade  the  payment  of 
any  stamp  tax,  any  promissory  note  liable  to  any  of  the  taxes  imposed 
by  this  Act,  without  the  same  being  duly  stamped,  or  having  there- 
upon an  adhesive  stamp  for  denoting  the  tax  hereby  charged  there- 
on, he,  she,  or  they  shall  be  deemed  guilty  of  a  misdemeanor,  and 
upon  conviction  thereof  shall  be  punished  by  a  fine  not  exceeding 
$200,  at  the  discretion  of  the  court. 

SEC.  10.  That  the  collectors  of  the  several  districts  are  hereby 
authorized  and  required  to  furnish  to  any  assistant  treasurer  of  the 
United  States  or  designated  depositary  thereof,  or  any  postmaster 
located  in  their  collection  districts,  respectively,  a  suitable  quantity 
of  adhesive  stamps,  without  prepayment  therefor,  and  may  in  ad- 
vance require  of  any  designated  depositary,  assistant  treasurer  of  the 
United  States,  or  postmaster  a  bond,  with  sufficient  sureties,  to  an 
amount  equal  to  the  value  of  the  adhesive  stamps  which  may  be 
placed  in  his  hands  and  remain  unaccounted  for,  conditioned  for  the 
faithful  return,  whenever  so  required,  of  all  quantifies  or  amounts 
undisposed  of,  and  for  the  payment  monthly  of  all  quantities  or 
amounts  sold  or  not  remaining  on  hand.  And  it  shall  be  the  duty  of 
such  collectors  to  supply  their  deputies  with,  or  sell  to  other  parties 
within  their  respective  districts  who  may  make  application  therefor, 
adhesive  stamps,  upon  the  same  terms  allowed  by  law  or  under  the 
regulations  of  the  Commissioner  of  Internal  Revenue,  who  is  hereby 
authorized  to  make  such  other  regulations,  not  inconsistent  herewith, 
for  the  security  of  the  United  States  and  the  better  accommodation 
of  the  public,  in  relation  to  the  matters  hereinbefore  mentioned,  as 
he  may  judge  necessary  and  expedient.  And  the  Secretary  of  the 
Treasury  may  from  time  to  time  make  such  regulations  as  he  may 
find  necessary  to  insure  the  safe-keeping  or  prevent  the  illegal  use  of 
all  such  adhesive  stamps. 

SEC.  11.  That  any  person  or  persons  who  shall  register,  issue, 
sell,  or  transfer,  or  who  shall  cause  to  be  issued,  registered,  sold,  or 
transferred,  any  instrument,  document,  or  paper  of  any  kind  or 
description  whatsoever  mentioned  in  Schedule  A  of  this  Act,  with- 
out the  same  being  duly  stamped,  or  having  thereupon  an  adhesive 
stamp  for  denoting  the  tax  chargeable  thereon,  and  canceled  in  the 
manner  required  by  law,  with  intent  to  evade  the  provisions  of  this 
Act,  shall  be  deemed  guilty  of  a  misdemeanor,  and  upon  conviction 
thereof  shall  be  punished  by  a  fine  not  exceeding  $50,  or  by  im- 

28 


WAR    REVENUE    LAW 

prisonment  not  exceeding  six  months,  or  both,  in  the  discretion  of 
the  court: 

Provided,  That  hereafter,  in  all  cases  where  the  party  has  not 
affixed  to  any  instrument  the  stamp  required  by  law  thereon  at  the 
time  of  issuing,  selling,  or  transferring  the  said  bonds,  debentures,  instruments- 
or  certificates  of  stock  or  of  indebtedness,  and  he  or  they,  or  any 
party  having  an  interest  therein,  shall  be  subsequently  desirous  of 
affixing  such  stamp  to  said  instrument,  or,  if  said  instrument  be  lost, 
to  a  copy  thereof,  he  or  they  shall  appear  before  the  collector  of 
internal  revenue  of  the  proper  district,  who  shall,  upon  the  payment 
of  the  price  of  the  proper  stamp  required  by  law,  and  of  a  penalty 
of  $10,  and,  where  the  whole  amount  of  the  tax  denoted  by  the  Tax  penalty, 
stamp  required  shall  exceed  the  sum  of  $50,  on  payment  also  of  in- 
terest, at  the  rate  of  six  per  centum,  on  said  tax  from  the  day  on 
which  such  stamp  ought  to  have  been  affixed,  affix  the  proper  stamp 
to  such  bond,  debenture,  certificate  of  stock  or  of  indebtedness  or 
copy,  and  note  upon  the  margin  thereof  the  date  of  his  so  doing, 
and  the  fact  that  such  penalty  has  been  .paid ;  and  the  same  shall 
thereupon  be  deemed  and  held  to  be  as  valid,  to  all  intents  and  pur- 
poses, as  if  stamped  when  made  or  issued : 

And  provided  further,  That  where  it  shall  appear  to  said  collec-      instruments 

,          J    ^  '.  «  .          J_.    ,.      , .  ,     .  not  stamped  by 

tor,  upon  oath  or  otherwise,  to  his  satisfaction,  that  any  such  mstru-   mistake  or  acci- 
ment  has  not  been  duly  stamped,  at  the  time  of  making  or  issuing   dent< 
the  same,  by  reason  of  accident,  mistake,  inadvertence,  or  urgent 
necessity,  and  without  any  willful  design  to  defraud  the  United  States 
of  the  stamp,  or  to  evade  or  delay  the  payment  thereof,  then  and  in 
such  case,  if  such  instrument,  or,  if  the  original  be  lost,  a  copy 
thereof,  duly  certified  by  the  officer  having  charge  of  any  records 
in  which  such  original  is  required  to  be  recorded,  or  otherwise  duly 
proven  to  the  satisfaction  of  the  collector,  shall,  within  twelve  cal- 
endar months  after  the  making  or  issuing  thereof,  be  brought  to  the 
said  collector  of  internal  revenue  to  be  stamped,  and  the  stamp  tax   o{     a 
chargeable  thereon  shall  be  paid,  it  shall  be  lawful   for  the  said   may??  re'mtte 
collector  to  remit  the  penalty  aforesaid  and  to  cause  such  instrument 
to  be  duly  stamped.    And  when  the  original  instrument,  or  a  certified 
or  duly  proven  copy  thereof,  as  aforesaid,  duly  stamped  so  as  to  enti- 
tle the  same  to  be  recorded,  shall  be  presented  to  the  clerk,  register, 
recorder,  or  other  officer  having  charge  of  the  original  record,  it 
shall  be  lawful  for  such  officer,  upon  the  payment  of  the  fee  legally 
chargeable  for  the  recording  thereof,  to  make  a  new  record  thereof,      New    record 
or  to  note  upon  the  original  record  the  fact  that  the  error  or  omis-   ?£T  paym< 
sion  in  the  stamping  of  said  original  instrument  has  been  corrected 
pursuant   to   law;   and   the   original   instrument  or   such   certified 
copy,  or  the  record  thereof,  may  be  used  in  all  courts  and  places  in 
the  same  manner  and  with  like  effect  as  if  the  instrument  had  been 
originally  stamped : 

And  provided  further,  That  in  all  cases  where  the  party  has  not   ^StaSfUin. 

affixed  the  stamp  required  by  law  upon  any  such  instrument  issued,   there  is  no  coi- 
registered,  sold,  or  transferred  at  a  time  when  and  at  a  place  where 
no  collection  district  was  established,  it  shall  be  lawful  for  him  or 

29 


WAR    REVENUE    LAW 


not   affected. 


them,  or  any  party  having  an  interest  therein,  to  affix  the  proper 
stamp  thereto,  or,  if  the  original  be  lost,  to  a  copy  thereof.  But 
no  right  acquired  in  good  faith  before  the  stamping  of  such  instru- 
ment, or  copy  thereof,  as  herein  provided,  if  such  record  be  required 
Accrued  rights  bv  law,  shall  in  any  manner  be  affected  by  such  stamping  as 

^*-        nf¥*.s*4-**A  *  I 

aforesaid. 

A  mortgage  may  be  registered,  although  unstamped,  provided  the 
bond  or  note  which  is  given  to  secure  has  been  stamped.  22  A.  G., 
Op.  533. 

Unstamped  instruments  are  not  invalid  for  lack  of  stamp,  unless  the 
failure  to  attach  the  stamp  was  intentionally  done  with  intent  to  evade 
payment  of  the  tax.  Weinkert  v.  Ziegler,  91  Md.,  318;  Bryan  v.  First 
National  Bank,  205  Pa.,  St.  7;  Rowe  v.  Bowman,  183  Mass.,  488;  T.  D. 
(1902)  474. 

An  unstamped  forged  instrument  is  admissible  in  a  criminal  action 
for  forgery.  State  v.  Shields  (la.)  83,  N.  W.,  807;  Bottorff  v.  Lewis  (la.) 
95  N.  W.,  262. 

SEC.  12.  That  hereafter  no  instrument,  paper,  or  document  re- 
quired by  law  to  be  stamped,  which  has  been  signed  or  issued  with- 
out being  duly  stamped,  or  with  a  deficient  stamp,  nor  any  copy 
thereof,  shall  be  recorded  until  a  legal  stamp  or  stamps,  denoting 
the  amount  of  tax,  shall  have  been  affixed  thereto,  as  prescribed  by 
law; 

Provided,  That  any  bond,  debenture,  certificate  of  stock,  or  cer- 
tificate of  indebtedness  issued  in  any  foreign  country  shall  pay  the 
same  tax  as  is  required  by  law  on  similar  instruments  when  issued, 
sold,  or  transferred  in  the  United  States ;  and  the  party  to  whom  the 
same  is  issued,  or  by  whom  it  is  sold  or  transferred,  shall,  before 
selling  or  transferring  the  same,  affix  thereon  the  stamp  or  stamps 
indicating  the  tax  required. 

SEC.  13.  That  it  shall  not  be  lawful  to  record  or  register  any  in- 
strument, paper,  or  document  required  by  law  to  be  stamped  unless 
a  stamp  or  stamps  of  the  proper  amount  shall  have  been  affixed  and 
canceled  in  the  manner  prescribed  by  law. 

SEC.  14.  That  no  instrument,  paper,  or  document  required  by  law 
to  be  stamped  shall  be  deemed  or  held  invalid  and  of  no  effect  for 
the  want  of  a  particular  kind  or  description  of  stamp  designated  for 
and  denoting  the  tax  charged  on  any  such  instrument,  paper,  or 
document,  provided  a  legal  documentary  stamp  or  stamps  denoting 
a  tax  of  equal  amount  shall  have  been  duly  affixed  and  used  thereon. 

SEC.  15.  That  all  bonds,  debentures,  or  certificates  of  indebtedness 
issued  by  the  officers  of  the  United  States  Government,  or  by  the 
officers  of  any  State,  county,  town,  municipal  corporation,  or  other 
corporation  exercising  the  taxing  power,  shall  be,  and  hereby  are, 
exempt  from  the  stamp  taxes  required  by  this  Act : 

Provided,  That  it  is  the  intent  hereby  to  'exempt  from  the  stamp 
taxes  imposed  by  this  Act  such  State,  county,  town,  or  other  munici- 
pal corporations  in  the  exercise  only  of  functions  strictly  belonging 
to  them  in  their  ordinary  governmental,  taxing,  or  municipal 
capacity : 

30 


Recording  _  of 
unstamped  i  n- 
struments  f  o  r- 
bidden. 


Bonds,      stock 
certificates   is- 
sued in  foreign 
countries    sub- 
ject to  tax. 


Unlawful  to  re- 
cord instrument 
unless  stamps  of 
proper  amount 
are  affixed  and 
cancelled. 

Instrument  not 
invalid  for  want 
of  particular 
kind  of  stamp. 


State,    munici- 
pal corporations, 
etc.,      exercising 
governmental 
function,  etc. 


WAR   REVENUE    LAW 

Provided  further,  That  stock  and  bonds  issued  by  cooperative  ^£° ofk  b* ^ 
building  and  loan  associations,  mutual  ditch  or  irrigating  companies,   ing.  and  loan  as- 
and  building  and  loan  associations  or  companies  that  make  loans 
only  to  their  shareholders,  shall  be  exempt  from  the  tax  herein 
provided. 

(T.  D.  2044.) 

Emergency  revenue  law — Building  and  loan  associations. 

The  exemption  of  co-operative  building  and  loan  associations  extends  only 
to  stocks  and  bonds  issued  by  such  associations  or  companies. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  November  9,  1914. 

SIR:  This  office  is  in  receipt  of  your  letter  of  the  26th  ultimo 
in  reference  to  liability  of  building  and  loan  associations  or  compa- 
nies under  the  internal-revenue  act  of  October  22,  1914. 

In  reply,  you  are  informed  that  the  exemption  extended  by  the 
revenue  act  of  October  22,  1914,  to  cooperative  building  and  loan 
associations,  etc.,  extends  only  to  stocks  and  bonds  issued  by  such 
associations  or  companies. 

The  law  appears  clear  on  this  subject  in  that  it  specifies  "stocks 
and  bonds  issued  by,"  etc.,  and  thereby  excludes  from  such  exemp- 
tion all  other  taxable  instruments  which  may  be  executed  or  deliv- 
ered by  the  associations  or  companies  contained  in  the  provision. 

Respectfully,  W.  H.  OSBORN, 

Mr.  -  — .       Commissioner  of  Internal  Revenue. 

SEC.  16.  That  all  the  provisions  of  this  Act  relating  to  dies, 
stamps,  adhesive  stamps,  and  stamp  taxes  shall  extend  to  and  include 
(except  where  manifestly  inapplicable)  all  the  articles  or  objects 
enumerated  in  Schedule  B,  subject  to  stamp  taxes,  and  apply  to  the 
provisions  in  relation  thereto. 

SEC.  17.  That  on  and  after  December  first,  nineteen  hundred  and 
fourteen,  any  person,  firm,  company,  or  corporation  that  shall  make, 
prepare,  and  sell,  or  remove  for  consumption  or  sale,  perfumery, 
cosmetics,  preparations,  compositions,  articles,  or  things  upon  which 
a  tax  is  imposed  by  this  Act,  as  provided  for  in  Schedule  B,  without 
affixing  thereto  an  adhesive  stamp  or  label  denoting  the  tax  before 
mentioned  shall  be  deemed  guilty  of  a  misdemeanor,  and  upon  con- 
viction thereof  shall  pay  a  fine  of  not  more  than  $500,  or  be  impris-  .  Penalty  for 

,  r   /  .  ,       .  I         «•         •  ,«  f  failure     to     affix 

oned  not  more  than  six  months,  or  both,  at  the  discretion  of  the   stamps    to   per- 

t  fumery    prepara- 

ll-  tions,  etc. 

SEC.  18.  That  any  manufacturer  or  maker  of  any  of  the  articles 
for  sale  mentioned  in  Schedule  B,  after  the  same  shall  have  been 
so  made  and  the  particulars  hereinbefore  required  as  to  stamps  have 
been  complied  with,  or  any  other  person  who  shall  take  off,  remove, 
or  detach,  or  cause,  or  permit,  or  suffer  to  be  taken  off,  or  removed 
or  detached,  any  stamp,  or  who  shall  use  any  stamp,  or  any  wrapper  Removal  or 
or  cover  to  which  any  stamp  is  affixed,  to  cover  any  other  article  81* 

31 


WAR    REVENUE    LAW 


Penalty. 


Sale  'er  re- 
moval or  con- 
cealment of  ar- 
ticles before  pay- 
ment of  tax. 


Penalty. 


Articles  for 
exportation  ex- 
empted. 


Monthly  state- 
ment of  manu- 
facturer of  com- 
p  1  i  a  n  c  e  with 
stamp  tax. 


Penalty. 


or  commodity  than  that  originally  contained  in  such  wrapper  or 
cover,  with  such  stamp  when  first  used,  with  the  intent  to  evade  the 
stamp  duties,  shall  for  every  such  article,  respectively,  in  respect 
of  which  any  such  offense  shall  be  committed,  be  deemed  guilty  of 
a  misdemeanor,  and  upon  conviction  thereof  shall  pay  a  fine  of  not 
more  than  $500,  or  be  imprisoned  not  more  than  six  months,  or 
both,  at  the  discretion  of  the  court,  and  every  such  article  or -com- 
modity as  aforesaid  shall  also  be  forfeited. 

SEC.  19.  That  any  maker  or  manufacturer  of  any  of  the  articles 
or  commodities  mentioned  in  Schedule  B,  as  aforesaid,  or  any  other 
person  who  shall  sell,  send  out,  remove,  or  deliver  any  article  or 
commodity,  manufactured  as  aforesaid,  before  the  tax  thereon  shall 
have  been  fully  paid  by  affixing  thereon  the  proper  stamp,  as  in  this 
Act  provided,  or  who  shall  hide  or  conceal,  or  cause  to  be  hidden  or 
concealed,  or  who  shall  remove  or  convey  away,  or  deposit,  or  cause 
to  be  removed  or  conveyed  away  from  or  deposited  in  any  place,  any 
such  article  or  commodity,  to  evade  the  tax  chargeable  thereon,  or 
any  part  thereof,  shall  be  deemed  guilty  of  a  misdemeanor,  and  upon 
conviction  thereof  shall  pay  a  fine  of  not  more  than  $500,  or  be 
imprisoned  not  more  than  six  months,  or  both,  at  the  discretion  of 
the  court,  together  with  the  forfeiture  of  any  such  article  or  com- 
modity ; 

Provided,  That  articles  upon  which  stamp  taxes  are  required  by 
this  Act  may,  when  intended  for  exportation,  be  manufactured  and 
sold  or  removed  without  having  stamps  affixed  thereto,  and  without 
being  charged  with  tax  as  aforesaid;  and  every  manufacturer  or 
maker  of  any  article  as  aforesaid*  intended  for  exportation,  shall 
give  such  bonds  and  be  subject  to  such  rules  and  regulations  to 
protect  the  revenue  against  fraud  as  may  be  from  time  to  time  pre- 
scribed by  the  Commissioner  of  Internal  Revenue,  with  the  approval 
of  the  Secretary  of  the  Treasury. 

SEC.  20.  That  every  manufacturer  or  maker  of  any  of  the  articles 
or  commodities  provided  for  in  Schedule  B,  or  his  foreman,  agent, 
or  superintendent  shall  at  the  end  of  each  and  every  month  make, 
sign,  and  file  with  the  collector  of  internal  revenue  for  the  district 
in  which  he  resides  a  declaration  in  writing  that  no  such  article  or 
commodity  has,  during  such  preceding  month  or  time  when  the  last 
declaration  was  made,  been  removed,  or  carried,  or  sent,  or  caused 
or  suffered  or  known  to  have  been  removed,  carried,  or  sent  from  the 
premises  of  such  manufacturer  or  maker  other  than  such  as  have 
been  duly  taken  account  of  and  charged  with  the  stamp  tax,  on  pain 
of  such  manufacturer  or  maker  forfeiting  for  every  refusal  or 
neglect  to  make  such  declaration  $100;  and  if  any  such  manufac- 
turer or  maker,  or  his  foreman,  agent,  or  superintendent,  shall  make 
any  false  or  untrue  declaration,  such  manufacturer  or  maker,  or 
foreman,  agent,  or  superintendent  making  the  same  shall  be  deemed 
guilty  of  a  misdemeanor,  and  upon  conviction  shall  pay  a  fine  of 
not  more  than  $500,  or  be  imprisoned  not  more  than  six  months, 
or  both,  at  the  discretion  of  the  court. 

SEC.  21.  That  the  stamp  taxes  prescribed  in  this  Act  on  the 

32 


WAR    REVENUE    LAW 


articles  provided  for  in  Schedule  B  shall  attach  to  all  such  articles 
and  things  sold  or  removed  for  sale  thirty  days  after  the  approval  of 
this  Act.  Every  person,  except  as  otherwise  provided  in  this  Act, 
who  offers  or  exposes  for  sale  any  article  or  thing  provided  for  in 
said  Schedule  B,  whether  the  article  so  offered  or  exposed  is  of  for- 
eign manufacture  and  imported  or  of  domestic  manufacture,  shall 
be  deemed  the  manufacturer  thereof,  and  shall  be  subject  to  all  the 
taxes,  liabilities,  and  penalties  imposed  by  law  for  the  sale  of  articles 
without  the  use  of  the  proper  stamp  denoting  the  tax  paid  thereon; 
and  all  such  articles  of  foreign  manufacture  shall,  in  addition  to  the 
import  duty  imposed  on  the  same,  be  subject  to  the  stamp  tax  pre- 
scribed in  this  Act : 

Provided  further,  That  internal  revenue  stamps  required  by  ex- 
isting law  on  imported  merchandise  shall  be  affixed  thereto  and 
canceled  at  the  expense  of  the  owner  or  importer  before  the  with- 
drawal of  such  merchandise  for  consumption,  and  the  Secretary 
of  the  Treasury  is  authorized  to  make  such  rules  and  regulations 
as  may  be  necessary  for  the  affixing  and  canceling  of  such  stamps, 
not  inconsistent  herewith. 

SEC.  22.  That  the  Commissioner  of  Internal  Revenue  shall  cause 
to  be  prepared  and  distributed  for  the  payment  of  the  taxes  pre- 
scribed in  this  Act  suitable  stamps  denoting  the  tax  on  the  docu- 
ment, article,  or  thing  to  which  the  same  may  be  affixed,  and  he  is 
authorized  to  prescribe  such  method  for  the  cancellation  of  said 
stamps,  as  substitute  for  or  in  addition  to  the  method  provided  in 
this  Act,  as  he  may  deem  expedient.  The  Commissioner  of  Internal 
Revenue,  with  the  approval  of  the  Secertary  of  the  Treasury,  is 
authorized  to  procure  any  of  the  stamps  provided  for  in  this  Act  by 
contract  whenever  such  stamps  can  not  be  speedily  prepared  by  the 
Bureau  of  Engraving  and  Printing;  but  this  authority  shall  expire 
on  the  first  day  of  November,  nineteen  hundred  and  fifteen,  except 
as  to  imprinted  stamps  furnished  under  contract,  authorized  by  the 
Commissioner  of  Internal  Revenue.  That  the  adhesive  stamps  used 
in  the  payment  of  the  tax  levied  in  Schedules  A  and  B  of  this  Act 
shall  be  furnished  for  sale  by  the  several  collectors  of  internal  reve- 
nue, who  shall  sell  and  deliver  them  at  their  face  value  to  all  persons 
applying  for  the  same,  except  officers  or  employees  of  the  Internal 
Revenue  Service : 

Provided,  That  such  collectors  may  sell  and  deliver  such  stamps 
in  quantities  of  not  less  than  $100  of  face  value,  with  a  discount  of 
one  per  centum,  except  as  otherwise  provided  in  this  Act. 


Schedule  B 
Tax  operative  30 
days  after  ap- 
proval of  Act. 


Stamps    to    be 
prepared. 


Contracts    for. 


Stamps  for 
sale  by  collect- 
ors. 


One  per  cent- 
um discount  on 
purchase  of 
stamps. 


SCHEDULE  A 
STAMP  TAXES 

Bonds,  debentures,  or  certificates  of  indebtedness  issued  on  and   tur^°nor'  cer 
after  the  first  day  of  December,  nineteen  hundred  and  fourteen,  by   oat*  of  imiebt- 
any  association,  company,  or  corporation,  on  each  $100  of  face  value    edness 
or  fraction  thereof,  5  cents,  and  on  each  original  issue,  whether  on 
organization  or  reorganization,  of  certificates  of  stock  by  any  such 
association,  company,  or  corporation,  on  each  $100  of  face  value  or   sue 

33 


WAR    REVENUE    LAW 


fraction  thereof,  5  cents,  and  on  all  sales,  or  agreements  to  sell,  or 
Shares  or  cer-   memoranda  of  sales  or  deliveries  or  transfers  of  shares  or  cer- 
tificates of  stock.   tificates   0£    stock-    jn    anv    association,    company,    or    corporation, 

whether  made  upon  or  shown  by  the  books  of  the  association,  com- 
pany, or  corporation,  or  by  any  assignment  in  blank,  or  by  any 
delivery,  or  by  any  paper  or  agreement  or  memorandum  or  other 
evidence  of  transfer  or  sale,  whether  entitling  the  holder  in  any 
manner  to  the  benefit  of  such  stock,  or  to  secure  the  future  payment 
of  money  or  for  the  future  transfer  of  any  stock,  on  each  $100  of 
face  value  or  fraction  thereof,  2  cents : 

Sales  of  Transfer  of  Stock. 

(13)  In  reckoning  the  stamp  tax  on  transfer  or  certificates  of  stock,  the 
tax  is  reckqned  on  the  face  value.     In  reckoning  this  tax,  the  fact  that  only 
part  of  the  face  value  of  shares  subscribed  for  and  issued  has  been  paid  by 
the  shareholders  is  not  to  be  taken  into  consideration. 

(14)  Where  stock  is  sold  at  the  par  value  of  $100,  and  upon  which  it 
appears  that  only  $25  have  been  paid,  the  tax  is  to  be  reckoned  upon  the 
face  value  of  $100,  and  not  upon  the  $25. 

(15)  WThere  one  certificate  represents  several  shares,  the  tax  of  2  cents 
on  each  $100  or  fraction  thereof  is  to  be  reckoned  on  the  face  value  of  the 
certificate,  and  not  on  the   face  value  of  each  separate  share. 

(16)  On  transfer  of  one  certificate  representing  500  shares,  $5  par  value, 
the  stamp  tax  required  is  50  cents. 

(17)  When  stock  is  transferred  for  which  no  certificate  has  been  issued, 
and  the  evidence  of  transfer  is  shown  only  by  books  of   the  company,   the 
stamps   should  be  placed  upon  such   books.     Where   the   change   of   owner- 
ship is  by  the  transfer  of  a  certificate,  and  the  certificate  contains  a  blank 
form  of  assignment  on  the  back,  which  is  filled  in  by  the  insertion  of  the 
name   of   the   person   to   whom   the   stock   is   transferred,    the   stamp    should 
be  placed  upon  the  certificate. 

(18)  In  case  of  an  agreement  to  sell,  or  where  the  transfer  is,  by  the  de- 
livery of  the  certificate,  signed  in  blank,  the  name  of  the  transferee  or  ven- 
dee to  be  filled  in  afterwards,  there  should  be  made  and  delivered  by  the 
seller  to  the  buyer  a  bill  or  memorandum  of  sale,  to  which  the  stamp  should 
be  affixed. 

(19)  Where  certificates  of  shares  were  sold  and  delivered  before  July 
1,  1898,  entry  of  transfer  on  corporate  books  after  June  30  does  not  require 
stamp. 

(20)  New  certificates  of  stock  issued  to  holder  in  lieu  of  original  cer- 
tificate, and  remaining  in  his  ownership,  do  not  require  stamps. 

(21)  When  certificate  of  stock  is  sold  and  stamp  tax  is  paid  on  memoran- 
dum thereof,  upon   transfer   of  this  certificate  to  purchaser's   name   no   ad- 
ditional tax  for  such  transfer  is  required.     Where  one  certificate  represents 
several  shares  of  stock   (however  large  the  number  of  shares),  on  transfer 
of   this   certificate  the   stamp  tax   is   to  be   reckoned   on   its    face   value   and 
not  on  the  face  value  of  each  separate  share  of  stock  which  it  represents. 

(22)  Transfers   of   stock   from   parties  occupying  fiduciary   relationships 
to  those  for  whom  they  held  the  stock  are  transfers  subject  to  taxation. 

(23)  A  owes  a  certificate  of  100  shares  of  stock;  he  transfers  50  shares 
to  B ;  there  are  two  certificates  of  50  shares  each  issued  in  lieu  of  the  100- 
share  certificate,  50  shares  going  to  A  and  50  shares  to  B.     The  tax  imposed 
is  on  the  transfer  to  B ;  there  is  no  tax  on  A's  transfer  to  himself. 

po^nTstock^s       Provided,  That  it  is  not  intended  by  this  Act  to  impose  a  tax  upon 
coital  ex-        an  agreement  evidencing  a  deposit  of  stock  certificates  as  collateral 
security  for  money  loaned  thereon,  which  stock  certificates  are  not 
actually  sold,  nor  upon  such  stock  certificates  so  deposited : 

Where   written   instruments   or  securities   deposited   in  a  bank  are   to 

34 


WAR    REVENUE    LAW 


Transfer     of 
ownership  by  de- 


be  held  as  collateral  for  a  loan  or  indebtedness  of  the  owner  it  is 
not  taxable  under  this  paragraph.  23  A.  G.,  Op.  219.  23  A.  G.,  Op.  54. 

Stock  hypothecated  by  delivery  of  certificates  without  a  written  agree- 
ment accompanying  it  is  not  taxable  under  this  paragraph.  22  A.  G., 
Op.  54. 

Pledging  of  stock  under  a  written  agreement  which  contains  a  power 
of  sale  on  default  of  condition  is-  taxable.  23  A.  G.,  616.  A  tax  on  sales 
is  constitutional.  U.  S.  v.  Thomas,  115  Fed.  Rep.,  207. 

Bonds  provided  for  in  a  mortgage ,  are  not  taxable  until  issued.  22 
A.  G.,  Op.  532. 

Provided  further,  That  in  case  of  sale  where  the  evidence  of  sta^°p°ekds.  to  be 
transfer  is  shown  only  by  the  books  of  the  company  the  stamp  shall 
be  placed  upon  such  books ;  and  where  the  change  of  ownership  is 
by  transfer  certificate  the  stamp  shall  be  placed  upon  the  certificate ; 
and  in  cases  of  an  agreement  to  sell  or  where  the  transfer  is  by 
delivery  of  the  certificate  assigned  in  blank  there  shall  be  made  and  iivery,  method  of 
delivered  by  the  seller  to  the  buyer  a  bill  or  memorandum  of  such  stamPin&- 
sale,  to  which  the  stamp  shall  be  affixed;  and  every  bill  or  memo- 
randum of  sale  or  agreement  to  sell  before  mentioned  shall  show 
the  date  thereof,  the  name  of  the  seller,  the  amount  of  the  sale,  and 
the  matter  or  thing  to  which  it  refers.  And  any  person  or  persons 
liable  to  pay  the  tax  as  herein  provided,  or  anyone  who  acts  in  the 
matter  as  agent  or  broker  for  such  person  or  persons,  who  shall 
make  any  such  sale,  or  who  shall  in  pursuance  of  any  such  sale 
deliver  any  such  stock,  or  evidence  or  the  sale  of  any  such  stock  or 
bill  or  memorandum  thereof,  as  herein  required,  without  having  the 
proper  stamps  affixed  thereto,  with  intent  to  evade  the  foregoing 
provisions,  shall  be  deemed  guilty  of  a  misdemeanor,  and  upon  con- 
viction thereof  shall  pay  a  fine  of  not  exceeding  $1,000,  or  be  im-  Penalty, 
prisoned  not  more  than  six  months,  or  both,  at  the  discretion  of  the 
court. 

(1)  When  a  bond  is  said  to  be  issued.    Whenever  a  corporation  issues  a 
bond,   and   there   accrues   to  the   corporation   a   benefit   or   consideration    for 
issuing  the  same,  the  bond  is  subject  to  taxation.     (Vol.  2,  Treas.  Dec.  (1898), 
No.  20156.) 

(2)  Stamp  tax;  certificates  of  stock;   sales  and  transfers  of  certificates 
of   stock.      (Vol.   2,   Treas.    Dec.    (1898),    No.   19607). 

(3)  In  reckoning  the  stamp  tax  on  transfers   of  certificates   of   shares, 
the  tax   is   reckoned  on  the   face  value.      (Vol.  2,   Treas.   Dec.    (1898),    No. 
19710.) 

(4)  Transfers  of  shares  or  certificates  of  stock;  how  stamps  are  to  be 
attached;   stamp  tax  to  be   reckoned  on   face   value  of   certificate.      (Vol.   2, 
Treas.    Dec.     (1898),    No.    19888.) 

(5)  Transfers    of    stock    from    guardian    to    ward    subject    to    taxation. 
(Vol.    2,    Treas.    Dec.     (1898),    No.    20070.) 

(6)  Preferred  stock  issued   in  lieu  of  common  stock  not  taxable   when 
there  is  no  change  of  ownership.     (Vol.  1,  Treas.  Dec.    (1898),  No.  20694.) 

(7)  Where   brokers   acting  in   behalf   of   their  principals  buy  stock  and 
receive   stamped  bills   of   sale   in   their   own   name,   they   may   transfer   such 
stock  on  the  books  of  the  corporation  to  the  names  of  their  principals  with- 
out additional  stamp  tax.     (Vol.  1,  Treas.  Dec.   (1899),  No.  20727.) 

(8)  Certificates  of  stock  of  a  foreign  corporation  when  sold  or  delivered 
within  the  United  States  are  liable  to  the  same  tax  as  certificates  of  stock 
of  any  domestic  corporation.     (Vol.  1,  Treas.  Dec.  (1899),  No.  20793.) 

(9)  "Puts"  and  "calls."     The  Attorney  General  decided  that  the  former 
are  not  subject  to  tax,  but  that  the  latter,  being  agreements  to  sell,  are  tax- 
able.    (Vol.  1,  Treas.  Dec.   (1899),  No.  21151.) 

35 


WAR   REVENUE    LAW 


Sales  or  agree- 
ments to  sell 
products  at  ex- 
changes  or 
boards  of  trade. 


Memorandum 
of  sale  to  be 
stamped. 


Form  of. 


Penalty. 


(10)  When  a  certificate  of  stock  is  presented  for  transfer  and  the  power 
of  attorney  on  the  back  thereof  is  dated  prior  to  July  1,  1898,  although  the 
name  of  the  transferee  is  not  filled  in  until  after  that  date,  both  the  power 
of  attorney  and  the  certificate  are  required  to  be  stamped.     (Vol.  1,  Treas. 
Dec.    (1899),    No.   21277.) 

(11)  No  tax  on  the  closing  of  a  stock  transaction  caused  by  margin  be- 
ing exhausted  because  of  market  going  against  speculator.     (Vol.  2,  Treas. 
Dec.    (1899),  No.  21707.) 

(12)  The  circumstances  under  which  the  memoranda  issued  by  brokers 
evidencing  the  sale  or  purchase  of  stock  need  or  need  not  be  stamped.     (Vol. 
2,  Treas.  Dec.    (1899),  No.  21711.) 

Upon  each  sale,  agreement  of  sale,  or  agreement  to  sell,  any  prod- 
ucts or  merchandise  at  any  exchange,  or  board  of  trade,  or  other 
similar  place,  either  for  present  or  future  delivery,  for  each  $100 
in  value  of  said  sale  or  agreement  or  sale  or  agreemnt  to  sell,  1 
cent,  and  for  each  additional  $100  or  fractional  part  thereof  in 
excess  of  $100,  1  cent. 

Provided,  That  on  every  sale  or  agreement  of  sale  or  agreement 
to  sell  as  aforesaid  there  shall  be  made  and  delivered  by  the  seller  to 
the  buyer  a  bill,  memorandum,  agreement,  or  other  evidence  of  such 
sale,  agreement  of  sale,  or  agreement  to  sell,  to  which  there  shall  be 
affixed  a  lawful  stamp  or  stamps  in  value  equal  to  the  amount  of  the 
tax  on  such  sale.  And  every  such  bill,  memorandum,  or  other 

After  an  agreement  to  sell  stock  on  future  delivery,  no  delivery  is 
made  but  a  settlement  is  had,  such  settlement  not  involving  a  re-sale 
does  not  require  new  memorandum  and  stamps.  McClain  v.  Fleshman, 
106  Fed.  Rep.,  880. 

Unless  a  memorandum  or  instrument  required  by  this  paragraph  is 
made  a  stamp  tax  can  not  be  collected  and  the  remedy  of  the  govern- 
ment is  on  the  penalty.  McClain  v.  Fleshman,  106  Fed.  Rep.,  880. 

A  "call,"  being  agreement  to  sell,  is  taxable.  Treat  v.  White,  181 
U.  S.,  265.  ^ 

The  tax  imposed  by  this  paragraph  is  constitutional.  Nichol  v.  Ames, 
173  U.  S.,  510. 

Sales  of  live  stock  at  stockyards  are  included. 

evidence  of  sale  or  agreement  to  sell  shall  show  the  date  thereof,  the 
name  of  the  seller,  the  amount  of  the  sale,  and  the  matter  or  thing 
to  which  it  refers ;  and  any  person  or  persons  liable  to  pay  the  tax 
as  herein  provided,  or  anyone  who  acts  in  the  matter  as  agent  or 
broker  for  such  person  or  persons,  who  shall  make  any  such  sale  or 
agreement  of  sale,  or  agreement  to  sell,  or  who  shall,  in  pursuance 
of  any  such  sale,  agreement  of  sale,  or  agreement  to  sell,  deliver 
any  such  products  or  merchandise  without  a  bill,  memorandum,  or 
other  evidence  thereof  as  herein  required,  or  who  shall  deliver  such 
bill,  memorandum,  or  other  evidence  of  sale,  or  agreement  to  sell, 
without  having  the  proper  stamps  affixed  thereto,  with  intent  to 
evade  the  foregoing  provisions,  shall  be  deemed  guilty  of  a  misde- 
meanor, and  upon  conviction  thereof  shall  pay  a  fine  of  not  exceeding 
$1,000,  or  be  imprisoned  not  more  than  six  months,  or  both,  at  the 
discretion  of  the  court. 

That  no  bill,  memorandum,  agreement,  or  other  evidence  of  such 
sale,  or  agreement  of  sale,  or  agreement  to  sell,  in  case  of  products 
or  merchandise  actually  delivered  at  the  time  of  sale  or  while  in 
vessel,  boat,  or  car,  and  actually  in  course  of  transportation,  shall  be 

36 


WAR   REVENUE   LAW 

subject  to  this  tax,  provided  such  bill,  memorandum,  agreement,  or 
other  evidence  of  such  sale,  or  agreement  or  sale,  or  agreement  to 
sell  shall  be  accompanied  by  bills  of  lading  or  vouchers  showing  that 
the  said  products  are  actually  in  course  of  transportation  as  afore- 
said. 

SAI,E    OF    PRODUCTS    OR    MERCHANDISE    ON    EXCHANGE,    ETC. 

(24)  The  provision  relative  to  sales,  or  agreements  to  sell,  of  products 
or  merchandise  at  any  exchange  or  board  of  trade,  or  other  similar  place, 
and  requiring  the  seller  to  give  a  bill  or  memorandum  which  shall  be  stamped, 
declared  constitutional. 

(25)  Sales  of  live  stock  at  stock  yards  come  within  the  law,  the  same 
being  a  similar  place  to  an  exchange  or  board  of  trade. 

(26)  The  tax  is  not  a  direct  tax,  nor  a  tax  upon  the  business  itself 
which  is  so  transacted,  but  is  a  duty  upon  the   facilities  made  use  of  and 
actually  employed  in  the  transaction  of  the  business,  separate  and  apart  from 
the  business  itself.      (Nicol  v.  Ames,   173   U.   S.,  509;   vol.   1,   Theas,   Dec. 
(1899),   No.   20984.) 

(27)  Transactions   of    live-stock   exchanges — Duty    of    exchanges,    when 
sale  is  made,  or  an  agreement  of  sale,  or  an  agreement  to  sell  entered  into, 
to  give  to  buyer  a  bill,  memorandum,  or  other  evidence  of  such  sale,  and  to 
place  thereon  the  required  stamp.     (Vol.  2,  Treas.  Dec.   (18»8),  No.  19739.) 

(28)  Tax  on  sales  "at  any  exchange,  or  board  of  trade,  or  other  similar 
place;"  live  stock  comes  within  the  classification  of  "any  products  or  mer- 
chandise;"  similar  place"   defined  in  reference  to  the  selling  of  live  stock; 
sales  of  live  stock  at  such  places  as  those  defined  subject  to  taxation.     (Vol. 
2,  Treas.  Dec.   (1898),  No.  20031.) 

(29)  To  constitute  an  exchange,  board  of  trade,  or  other  similar  place, 
so  as  to  subject  the  evidence  of  sale  to  tax,  there  must  be  more  than  one 
person,  company,  or  partnership  authorized  to  negotiate  sales  thereat.     (Vol. 
1,  Treas.  Dec.   (1899),  No.  21148.) 

(30)  Bucket  shops  defined;   tax  on  agreements  to  sell  shares  of  stock 
or  merchandise   at   such  places.      (Vol.   1,    Treas.   Dec.    (1899),    No. -21279.) 

(31)  Sales  of  grain  made  at  an  exchange  and  sales  of  grain  made  by 
brokers  in  their  own  offices,  held  taxable.     (Vol.  2,  Treas.  Dec.   (1899),  No. 
21396.) 

(32)  Transactions    of    live-stock   exchanges — Duty    of    exchanges,    when 
sale  is  made,  or  an  agreement  of  sale,  or  an  agreement  to  sell  entered  into, 
to  give  to  buyer  a  bill,  memorandum,  or  other  evidence  of  such  sale,  and  to 
place  thereon  the  required  stamp.     (T.  D.  19739.) 

Promissory  notes,  except  bank  notes  issued  for  circulation,  and 
for  each  renewal  of  the  same,  for  a  sum  not  exceeding  $100,  2  cents ; 
and  for  each  additional  $100  or  fractional  part  thereof  in  excess  of 
$100,  2  cents. 

PROMISSORY  NOTES. 

Promissory  notes,  except  bank  notes  issued  for  circulation,  and  for  each 
renewal  of  the  same,  for  a  sum  not  exceeding  $100,  2  cents;  and  for  each 
additional  $100  or  fractional  part  thereof  in  excess  of  $100,  2  cents. 

(33)  A  judgment  note  is  a  promissory  note  and  is  required  to  be  stamped 
as  such.     (T.  D.  19652.) 

(34)  Receipts  accepted  in  lieu  of  promissory  note,  as  evidence  of  money 
loaned,  must  be  stamped  as  promissory  notes.     (T.  D.  20985.) 

(35)  Promissory    notes    under    seal    taxable    same    as    other    promissory 
notes,  and  not  as  bonds.     T.  D.  21691  revoked.     (T.  D.  21815.) 

(36)  Checks  used  in  lieu  of  promissory  notes  must  be  stamped  at  the 
rate  of  2  cents  per  $100.     (Vol.  2,  Treas.  Dec.  (1898),  No.  20463.) 

Following  rulings  are  taken  from  Supplement  to  Internal  Revenue  Cir- 
cular No.  503,  dated  August  16,  1898: 

(37)  Where   a   note   or   notes   with   detached   interest-coupon   notes    are 

37 


WAR   REVENUE    LAW 

given,  each  coupon  note  requires  a  stamp  in  addition  to  the  stamp  placed 
on  the  principal  note. 

(38)  Interest   coupons    attached    to   bonds    and    surrendered    as    receipts 
for  interest  paid  do  not  require  a  stamp. 

(39)  Nd  stamp  is  required  upon  the  transfer  by  indorsement  . 
issory  notes. 

(40)  Where  notes  secured  by  a  deed  of  trust  are  used  as  collateral,  the 
deed  of  trust  and  the  notes  are  required  to  be  stamped  not  on  the  basis  of 
their  face  value,  but  on  the  amount  for  which  they  are  pledged   (that  is  to 
say,  the  memorandum  of  their  pledge  must  be  so  stamped).     This  pledge  of 
notes  and  deed  trust  does  not  require  to  be  stamped  again  because  of   re- 
newals of  the  notes  held  as  collateral  if  the  pledge   itself  is  not  renewed. 
(Pledges  not  taxable  under  act  of   Oct.  22,   1914.) 

(41)  Promissory  notes  which  have  matured  and  have  been  allowed  to 
run  without  suit  are  held  not  to   be  renewed  by  the  payment   of   interest. 
This  is  looked  upon  as  a  "forbearance"  and  not  a  renewal,  the  holder  not 
relinquishing  his  right  of  action   for  any  stated  period. 

Bills  .of  lading  Express  and  freight:  It  shall  be  the  duty  of  every  railroad  or 
steamboat  company,  carrier,  express  company,  or  corporation  or  per- 
son whose  occupation  is  to  act  as  such,  to  issue  to  the  shipper  or 
consignor,  or  his  agent,  or  person  from  whom  any  goods  are  accepted 
for  transportation  where  a  charge  exceeding  5  cents  is  made  a  bill 
of  lading,  manifest,  or  other  evidence  of  receipt  and  forwarding  for 
each  shipment  received  for  carriage  and  transportation,  whether  in 
bulk  or  in  boxes,  bales,  packages,  bundles,  or  not  so  inclosed  or  h> 
cluded;  and  such  shipper,  consignor,  agent,  or  person  shall  duly 
attach  and  cancel,  as  is  in  this  Act  provided,  to  each  of  said  bills  of 
lading,  manifests,  or  other  memorandum,  a  stamp  of  the  value  of  1 
cent: 

EXPRESS    AND    FREIGHT    BILLS    OF    LADING,    ETC. 

United  States  v.  Wells,  Fargo  &  Co.  Express   (96  Fed.,  835). 
Crawford  v.  Hubbell   (89  Fed.,  961). 

(42)  The  common  carrier  shall  issue  bills  of  lading,  manifest,  or  other 
evidence  of  receipt  and  forwarding.    "Shipment"  defined!     On  a  through  bill 
of  lading  it  is  one  shipment,  though  several  modes  of  conveyance  are  em- 
ployed.    Every  separate  shipment  requires   evidence  that  it  has   been  made, 
and  to  the  evidence  the  stamp  is  affixed.     (Vol.  2,  Treas.  Dec.    (1898),  No. 
19829.) 

(43)  Opinion  of  the  Attorney  General,  August   17,   1898,   on  the   ques- 
tion whether  the  word   "goods"  includes  money :     Where  an  express   com- 
pany  receives   money    for   transportation,    it   is    regarded   as    "goods"    under 
Schedule  A,  and  a  bill  of  lading  must  be  issued  therefor  and  a  stamp  affixed. 
(Vol.   2,    Treas.    Dec.    (1898),    No.    19970.) 

(44)  Receipts,  bills  of  lading,  or  manifests  issued  by  express  companies 
in  cases  of  shipment  of  money  and  securities  of  the  United  States  Govern- 
ment under  contract   for  transportation   of   same   are   subject  to   stamp  tax 
under  act  of  1898.      (Vol.   2,   Treas.   Dec.    (1898),   No.   19996.) 

(45)  The  Attorney  General  holds  that  the  law  which  makes  it  the  duty 
of  the  carrier  to  issue  a  bill  of  lading  or  a  receipt  to  a  person  from  whom 
any  goods  are  accepted  for  transportation,  and  to  stamp  the  same,  does  not 
apply  to  baggage  received  by  railroad  companies  and  carried  upon  the  same 
train  with   the  owner,   whether   such   baggage   be   the  quantity  allowed   or- 
dinarily by  the  rules  of  the  railroad  company  or  is  in  excess  of  such  amount. 
(Vol.  2.  Treas.  Dec.    (1898),  No.  20169.) 

(46)  Exemption  from  tax  of  express  matter  carried   for  railroad  com- 
pany   free    under    contract    with    express    company.      (Vol.    2,    Treas.    Dec. 
(1898).    No.   20240.) 

(47)  Memorandum  receipts  for  freight,  afterwards  exchanged   for  bills 
of  lading,  must  be  stamped  when  issued.     (Vol.  2,  Treas.  Dec.    (1899)    No. 
21688.) 

38 


WAR   REVENUE   LAW 

(48)  Concerning   the   business    of    local    expressmen    and    common    car- 
riers.     (Vol.  2,  Treas.   Dec.    (1899),   No.   21692.) 

(49)  No    tax    on    receipts    issued    for    special-delivery   baggage.     T.    D. 
21668   revoked.      (T.   D.   13.) 

(50)  When   tax   is   paid   on   general   bundle   of   newspapers,   each   pack- 
age  in   the   general   bundle   which   is   taken   therefrom   and   delivered   at   in- 
termediate  points    does   not   require   a   stamp.      (T.    D.    19846.) 

(51)  Dray  tickets   or   shipping  receipts  not   surrendered   for  a   stamped 
bill  of  lading  must  be  themselves  stamped.     (T.  D.  19887.) 

(52)  Tax  on  bills  of  lading  or  receipts   for  goods  accepted   for  trans- 
portation by  express  and  freight  companies — Definition  of  "express  business" 
within  the  meaning  of  the  law.      (T.   D.   19965.) 

(53)  Bills    of    lading    or    receipts    from    transportation    companies    may 
include  more  than   one   shipment  therein,  provided  that  a  stamp   or   stamps 
amounting  in  value  to  1  cent  for  each  shipment  shall  be  affixed  thereto  and 
canceled.      (T.    D.    20194.) 

(T.  D.  2059.) 

Emergency  revenue  law — Bills  of  lading. 

It  is  the  duty  of  the  carrier  to  see  that  the  stamp  is  duly  affixed  and  canceled 
when  the  bill  of  lading  is  issued  and  delivered  to  the  shipper. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  November  18,  1914. 

SIR:  This  office  is  in  receipt  of  your  letter  of  the  14th  instant,  calling 
attention  to  the  provision  of  the  internal-revenue  act  of  October  22,  1914, 
relative  to  bills  of  lading. 

You  inquire  whether  the  whole  duty  of  the  railroad  company  is  performed 
when  it  issues  such  bill  of  lading,  or  whether  it  is  the  duty  of  the  railroad 
company  not  only  to  issue  the  bill  of  lading  but  to  refuse  to  accept  the  ship- 
ment until  the  shipper  affixes  the  necessary  internal-revenue  stamp  and  can- 
cels it  as  required  by  law. 

In  reply,  you  are  informed  that  this  matter  has  received  consideration, 
and  it  is  the  opinion  of  this  office  that  it  is  the  duty  of  the  railroad  company 
to  see  that  the  stamp  is  duly  affixed  and  canceled  when  the  bill  of  lading 
is  issued  and  delivered  to  the  shipper. 

In  reply  to  your  other  inquiries  in  regard  to  messages  sent  over  the  lines 
on  the  railroad,  you  are  informed  that  messages  or  dispatches  of  the  officers 
or  employees  concerning  the  affairs  and  service  of  the  company  sent  over  the 
wires  on  their  respective  railroads  are  exempt.  If  they  do  not  relate  to  the 
business  of  the  company,  the  exemption  does  not  apply. 

Respectfully, 

ROBT.  WILLIAMS,  JR., 

Actinq  Commissioner  of  Internal  Revenue. 
Mr. . 

(T.  D.  2065) 

Emergency  revenue  laze — Bills  of  lading. 

The  law  requiring  bills  of  lading  to  be  stamped  does  not  apply  to  local 
operators  for  the  delivery  of  packages,  baggage,  and  such  like,  within 
the  limits  of  the  same  town  or  city. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  November  23,  1914. 

SIR:  In  reply  to  your  letter  of  the  13th  instant,  you  are  informed  that 
mere  local  operators  for  the  delivery  of  packages,  baggage,  and  such  like, 
within  the  limits  of  the  same  town  or  city,  are  not  required  to  give  bills  of 
lading.  Although  such  operators  may  give  a  receipt  for  articles  to  be  deliv- 
ered, such  receipt  is  not  required  to  be  stamped.  A  mere  carrier,  as,  for  in- 
stance, a  person  with  a  horse  and  wagon,  who  does  a  local  delivery  business 

39 


WAR   REVENUE   LAW 

in  a  city  or  town,  is  not  included  within  the  above  requirement.  The  car- 
riers which  were  intended  to  be  included  within  the  terms  of  Schedule  A, 
under  the  head  of  "Express  and  freight,"  are  such  as  are  engaged  in  the 
transportation  of  express  matter  and  freight  from  one  place  to  another  in 
the  ordinary  course  of  commerce  and  trade. 
Respectfully, 

ROBT.  WILLIAMS,  JR., 

Acting  Commissioner  of  Internal  Revenue. 
Mr.  — . 

The*  tax  on  foreign  bills  of  lading  is  unconstitutional  as  a  tax  on 
exports.  Fairbanks  v.  United  States,  181  U.  S.,  284. 

Goods  shipped  from  the  United  States  to  Canada  or  Mexico  by  rail 
are  not  taxable  under  this  paragraph.  24  A.  G.,  Op.  44. 

The  word  "goods"  includes  money.  22  A.  G.,  Op.  178.  This  applies 
to  money  and  goods  transported  for  the  government  under  a  contract. 

An  excess  baggage  receipt  issued  by  a  railroad  company  does  not  re- 
quire a  stamp.  22  A.  G.,  Op.  246. 

Goods  carried  by  an  express  company  for  a  railroad  company  over 
the  lines  of  the  latter,  free  of  charge,  are  not  subject  to  this  paragraph. 
22  A.  G.,  252. 

The  tax  on  the  manifest  of  a  ship  for  clearance  for  a  foreign  port 
is  void  as  a  tax  on  exports.  New  York  &  Cuba  Mail  S.  S.  Co.  v.  United 
States,  125  Fed.  Rep.,  320. 

No  liability  is  imposed  on  a  carrier  for  refusal  to  accept  goods.  Wil- 
kins  v.  United  States,  96  Fed.  Rep.,  835. 

The  carrier  is  not  required  to  pay  the  tax  itself.  American  Express 
Co.  v.  Michigan,  177  U.  S.,  404.  Reversing  Attorney  General  v.  American 
Express  Co.,  77  N.  W.,  317. 

But  this  paragraph  does  not  prevent  a  state  commission  from  fixing 
rates  in  such  a  manner  that  the  carrier  must  pay  the  tax  itself.  Trammel! 
v.  Dinsmore,  102  Fed.  Rep.  794,  reversing  Dinsmore  v.  Southern  Express 
Co.,  92  Fed.  Rep.,  714;  also  183  U.  S.,  116. 

Freight  and  Express  Receipts. 

Paragraph  5  of  Schedule  A  requires  every  railroad  or  steamboat  com- 
pany, carrier,  express  company,  or  corporation  or  person  whose  occupation 
is  to  act  as  such,  to  issue  to  the  shipper  or  consignor,  or  his  agent,  or  person 
from  whom  any  goods  are  accepted  for  transportation  when  a  charge  ex- 
ceeding 5  cents  is  made  a  bill  of  lading,  manifest,  or  other  evidence  of  receipt 
and  forwarding  for  each  shipment  received. 

A  literal  compliance  with  this  requirement  is  in  some  cases  impracticable 
or  impossible. 

It  is,  therefore,  provided  that  where  freight  is  accepted  at  nonagency 
stations,  it  must  be  receipted  for  by  conductors  accepting  it.  He  must  see 
to  it  that  an  internal-revenue  stamp  of  1  cent  denomination  is  attached  to 
each  of  such  receipts  and  canceled  as  required  by  these  regulations  before 
such  shipments  are  accepted  for  transportation:  Provided,  however,  That  in 
the  event  shipments,  so  offered  are  of  a  perishable  nature,  or  are  likely  to 
deteriorate  by  delay,  or  to  obstruct  sidings  or  other  facilities  by  being  refused 
for  lack  of  a  compliance  with  the  provisions  of  the  act,  or  if  snippers  or  their 
representatives  are  not  at  such  nonagency  stations  to  receive  or  to  stamp  such 
receipts,  conductors  may  accept  and  transport  such  nonagency  shipments  to 
destination  in  advance  of  the  affixing  of  the  stamp.  In  such  cases,  receipts 
issued  by  the  conductors  must  not  be  surrendered  to  the  shipper,  but  must 
be  delivered  with  the  freight  to  the  destination  agent,  who,  in  such  cases, 
must  present  the  consignor's  receipt  to  the  consignee  and  demand  that  it  be 
stamped  and  the  stamp  canceled  by  him  as  agent  for  the  shipper  before 
delivery  of  the  shipment.  If  a  nonagency  shipment  be  destined  to  another 
nonagency  station,  and  the  tax  is  not  paid  by  the  shipper,  the  conductor's 
receipt  therefor  must  be  indorsed  "Stamp  tax  not  paid,"  and  it  must  be 
delivered  with  the  freight  to  the  agent  at  the  nearest  agency  station  to  the 
destination  of  the  shipment  for  execution  and  delivery  of  the  receipt  by  and 
to  the  consignee.  If  a  nonagency  shipment,  upon  which  the  tax  is  not  paid 

\ 


WAR   REVENUE   LAW 

by  the  shipper,  be  destined  to  a  point  on  another  railway,  the  agent  at  the 
junction  point  at  which  the  shipment  is  delivered  to  the  connecting  line  must 
indorse  on  the  delivery  slip  or  manifest  for  such  shipment  "Stamp  tax  not 
paid,"  which  delivery  slip  shall  follow  to  the  delivery  station,  the  agent  at 
which  shall  collect  the  tax  before  delivery  of  the  freight. 

Shipments  of  milk  or  cream,  consisting  of  one  or  more  cans,  shipped 
by  one  shipper  to  one  consignee  on  the  same  date  and  train  to  which  milk 
or  cream  tickets  are  attached,  will  be  regarded  as  one  shipment,  and  to  one 
of  the  milk  tickets  a  stamp  must  be  affixed,  unless  other  evidence  of  receipt 
is  issued,  in  which  case  the  other  evidence  shall  be  properly  stamped. 

Switching  tickets  covering  local  switching  orders  for  which  a  charge  is 
made,  covered  by  no  bill  of  lading,  will  be  regarded  and  stamped  as  evi- 
dences of  receipt. 

Dray  tickets,  or  shippers  tickets,  will  be  regarded  and  stamped  as  evi- 
dences of  receipt,  unless  surrendered  for  a  bill  of  lading. 

Baggage  checks  for  the  transportation  of  bicycles,  dogs,  baby  carriages, 
etc.,  will  be  regarded  as  evidences  of  receipt  and  should  be  properly  stamped. 

No  stamp  is  required  upon  Federal  and  State  Government  shipments  of 
Government  or  State  property,  for  which,  if  a  stamp  were  issued,  the  Federal 
Government  or  State  government  would  be  required  to  pay. 

Passage  Tickets.     . 

A  tax  is  imposed  on  tickets  sold  in  the  United  States  for  passage  by  any 
vessel  to  a  foreign  port  where  the  amount  charged  is  in  excess  of  $10,  and 
whether  the  vessel  for  which  the  ticket  is  sold  sails  from  a  port  of  the 
United  States  or  not.  It  is  the  duty  of  the  person  selling  the  ticket  to  affix 
and  cancel  the  stamp  to  the  ticket  or  paper  which  evidences  the  sales,  namely, 
the  coupon  or  order,  at  the  time  same  is  sold. 

Where  a  single  ticket  is  issued  for  transportation  of  more  than  one 
passenger,  the  ticket,  coupon,  or  prepaid  order  must  be  stamped  at  the  proper 
rate  for  each  passenger  based  upon  the  number  of  passengers  and  the  total 
amount  paid  for  the  transportation. 

Where  proxies  are  sent  out  by  corporations  to  be  executed  and  returned 
to  the  corporation  or  to  the  person  named  in  proxy,  such  proxies  may  be 
stamped  after  execution  and  delivery  by  the  person  receiving  same  as  the 
agent  of  the  person  executing  the  proxy. 

Provided,  That  a  consignment  of  newspapers  to  any  one  point      ?ut    one    re- 

1.rr  .          ,         ..  °  .  i          •      i          1     quired    on    bun- 

or  to  different  points  by  the  same  tram  or  conveyance  when  inclosed  dies    of    news- 

in  one  general  bundle  at  the  point  of  shipment  shall  be  considered  as  papers- 

one  shipment,  an,  in  lieu  of  a  bill  of  lading  therefor,  the  publisher 

of  such  newspaper  shall  file  on  or  before  the  fifteenth  day  of  each 

month  with  the  collector  of   internal   revenue   for  the  district  in 

which  such  newspaper  is  published  a  report  under  oath  showing  the 

number  of  such  shipments  during  the  preceding  month,  to  which 

report  such  publisher  shall  affix  and  cancel  stamps  equal  in  value  to 

1  cent  for  each  shipment  so  reported : 

Provided  further,  That  the  report  herein  required  shall  not  include 
shipments  of  newspapers  delivered  to  points  within  the  county  in 
which  the  same  are  published.  Any  failure  to  issue  such  bill  of 
lading,  manifest,  or  other  memorandum,  as  herein  provided,  shall 
subject  such  railroad  or  steamboat  company,  carrier,  express  com- 
pany, or  corporation  or  person  to  a  penalty  of  $50  for  each  offense. 

Telegraph  and  telephone  messages :    It  shall  be  the  duty  of  every      Telephone 
person,  firm,  or  corporation  owning  or  operating  any  telegraph  or   r 
telephone  line  or  lines  to  make  within  thirty  days  after  the  expiration 
of  each  month  a  sworn  statement  to  the  collector  of  internal  revenue 
in  each  of  their  respective  districts,  stating  the  number  of  dispatches, 

41 


WAR   REVENUE   LAW 


Monthly  state- 
ment. 


One  cent  tax. 


But     one     tax 
to   be  imposed. 


Messages  of  of- 
ficers and  em- 
ployes exempt. 


messages,  or  conversations  originated  at  each  of  their  respective 
exchanges,  toll  stations,  or  offices,  and  transmitted  thence  over  their 
lines  during  the  preceding  month  for  which  a  charge  of  15  cents  or 
more  was  imposed,  and  for  each  of  such  messages  or  conversations 
the  said  person,  firm,  or  corporation  shall  collect  from  the  person 
paying  for  the  message  or  conversation  a  tax  of  1  cent  in  addition 
to  the  regular  charges  for  the  message  or  conversation,  which  tax 
the  said  person,  firm,  or  corporation  shall  in  turn  pay  to  the  said 
collector  of  internal  revenue  of  their  respective  districts  : 

Provided,  That  only  one  payment  of  said  tax  shall  be  required, 
notwithstanding  the  lines  of  one  or  more  persons,  firms,  or  corpora- 
tions shall  be  used  for  the  transmission  of  each  of  said  messages  or 
conversations  : 

Provided  further,  That  the  messages  or  dispatches  of  the  officers 
and  employees  of  any  telegraph  or  telephone  company  concerning 
the  affairs  and  service  of  the  company,  and  like  messages  or  dis- 
patches of  the  officials  and  employees  of  railroad  companies  sent 
over  the  wires  on  their  respective  railroads  shall  be  exempt  from 
this  requirement: 

And  provided  -further,  That  messages  of  officers  and  employees  of 
the  Government  on  official  business  shall  be  exempt  from  the  taxes 
herein  imposed  upon  telegraphic  and  telephonic  messages. 

(T.  D.  2058.) 

Emergency  revenue  law  —  Telegraph  and  telephone  messages. 

Law  and  instructions  relative  to  the  tax  imposed  on  telegraph  and  telephone 

messages  by  the  act  of  October  22,  1914,  effective  December  1,  1914. 

TREASURY  DEPARTMENT, 

OFFICE  OF  COMMISSIONER  OF   INTERNAL  REVENUE, 
on,  D.  (,.,  November  13, 


Instructions. 

1.  A  company  shall  make  one  report  and  one  return  for  the  company 
as  a  whole  and  not  for  each  of  its  exchanges  and  toll   stations  separately. 
Such  report  and  return  shall  be  made  to  the  collector  of  internal  revenue  of 
the  district  in  which  the  company's  principal  office  is  located. 

2.  Every  company  shall  include  in  its  report  all  taxable  messages  orig- 
inated by  it  without  regard  to  the  ownership  of  toll  lines  used  in  transmitting 
those  messages.    Telephone  companies  receiving  messages  to  be  retransmitted 
over  the  lines  of  a  telegraph  company,  or  telegraph  companies  receiving  mes- 
sages to  be  retransmitted  over  the  line  of  a  telephone  company,  will  be  re- 
garded as  the  point  where  such  messages  originate.     In  such  cases  the  com- 
pany retransmitting  such  messages  will  not  be  required  to  include  the  same 
in  its  monthly  return.  •  Where,  however,  a  message  sent  over  a  telephone  line 
is  received  directly  from  the  sender,  the  company  receiving  and  transmitting 
the  same  will,  in  such  case,  be  regarded  as  the  point  of  origin,  and  will  in- 
clude all  such  taxable  messages  in  its  'monthly  return.     A  reversed  message 
shall  be  considered  as  originating  at  the  point  of  collection. 

3.  Reports  and  returns  may  be  made  by  a  company  for  its  fiscal  month 
or  billing  period  to  be  filed  within  30  days  after  expiration  of  fiscal  month, 
provided  full  return  is  made  for  the  period  during  which  the  tax  is  to  be 
collected. 

4.  Additions  may  be  made  any  month  for  errors  on  the  previous  month's 
reports  and  returns.    Reductions  covering  items  reported  in  excess  in  previous 
months  not  allowable.     In  such  cases  amended  returns  may  be  filed  before 
assessment  is  made,  otherwise  claim   for  abatement  or  refund,  as  the  case 
may  be,  should  be  filed. 

5.  Messages   originating   at    automatic   telephone    stations,    for    each    of 

42 


WAR   REVENUE   LAW 

which  a  charge  of  15  cents  or  more  was  made,  are  subject  to  tax,  and  com- 
panies owning  or  operating  such  stations  must  include  all  such  messages  in 
their  monthly  returns.  The  method  of  collecting  the  tax  from  the  senders 
of  such  messages  is  a  matter  wholly  within  the  province  of  the  companies 
receiving  and  transmitting  the  messages. 

6.  All  overtime  telephone  messages,  where  the  initial  rate  is  less  than 
15  cents,  but  the  total  charge,  on  account  of  the  overtime,  brings  the  charge 
to  15  cents  or  more,  are  subject  to  tax. 

7.  Messages   transmitted   over   private   leased   circuits   and   relating   ex- 
clusively to   the   business   for   which   the   circuit  was   leased   are   held  to  be 
exempt  from  tax.     Where,  however,  any  such  leased  circuit  is  used  for  the 
transmission  of  messages  other  than  above  stated,  return  for  all  such  mes- 
sages for  which  a  charge  of  15  cents  or  more  would  ordinarily  be  made  must 
be  rendered  monthly  by  tne  lessee. 

8.  Messages   or   dispatches   of   officers   and   employees 'of   the    company 
concerning  the  affairs  and  service  of  the  company,  and  like  messages  or  dis- 
patches of  officials  and  employees  of  railroad  companies  sent  over  the  wires 
on  their  respective  railroads,   are  exempt   from  tax.     Franked  messages,   if 
of  a  private  character,  for  which  a  charge  of  15  cents  or  more  would  other- 
wise be  charged,  do  not  come  within  the  exemption  above  referred  to,  and 
should  be  included  in  the  return  made. 

9.  Messages  of  officers  and  employees  of  the  United  States  Government 
on  official  business  and  like  messages  of  State  officials  are  exempt  from  tax. 

ROBT.  WILUAMS,  JR., 

Acting  Commissioner  of  Internal  Revenue. 
Approved. 

W.  G.  McAooo, 

Secretary  of  the  Treasury. 

Regulations. 

1.  A  company  shall  make  one  report  and  one  return  for  the  company 
as  a  whole  and  not  for  each  of  its  exchanges  and  toll  stations  separately;  such 
report  and  return  shall  be  made  to  the  collector  of  internal  revenue  of  the 
district  in  which  the  company's  principal  office  is  located. 

2.  Every  company  shall  include  in  its  report  all  taxable  messages  origi- 
nated by  it  without  regard  to  the  ownership*  of  toll  lines  used  in  transmit- 
ting  those    messages.     Telephone    companies    receiving    messages    to    be    re- 
transmitted over  the  lines  of  a  telegraph  company,  or  telegraph  companies 
receiving  messages  to  be  retransmitted  over  the  line  of  a  telephone  company, 
will  be  regarded  as  the  point  where  such  messages  originate.     In  such  cases 
the   company  retransmitting  such   messages   will  not  be   required   to  include 
the   same  in   its   monthly   return.     Where,   however,   a   message   sent  over  a 
telephone  line  is  received  directly  from  the  sender,  the  company  receiving  and 
transmitting  the  same  will,  in  such  case,  be  regarded  as  the  point  of  origin, 
and  will  include  all  such  taxable  messages  in  its  monthly  return.     A  reversed 
message  shall  be  considered  as  originating  at  the  point  of  collection. 

3.  Reports  and  returns  may  be  made  by  a  company  for  its  fiscal  month 
or  billing  period  to  be  filed  within  30  days  after  expiration  of  fiscal  month, 
provided  full  return  is  made  for  the  period  during  which  the  tax  is  to  be 
collected. 

4.  Additions    may    be    made    any    month    for    errors    on    the    previous 
month's  reports  and  returns.     Reductions  covering  items  reported  in  excess 
in  previous  months  not  allowable.     In  such  cases  amended  returns  may  be 
filed  before  assessment  is  made,  otherwise  claim  for  abatement  or  refund,  as 
the  case  may  be,  should  be  filed. 

5.  Messages    originating   at    automatic   telephone    stations    for    each    of 
which  a  charge  of  15  cents  or  more  was  made  are  subject  to  tax,  and  com- 
panies owning  and  operating  such  stations  must  include  all  such  messages  in 
their  monthly  returns.     The  method  of  collecting  the  tax  from  the  senders 
of  such  messages  is  a  matter  wholly  within  the  province  of  the  companies 
receiving  and  transmitting  the  messages. 

6.  All  overtime  telephone  messages   where  the  initial  rate  is  less  than 
15  cents,  but  the  total  charge,  on  account  of  the  overtime,  brings  the  charge 
to  15  cents  or  more,  are  subject  to  tax. 

43 


WAR   REVENUE   LAW 

7.  Messages  transmitted  over  private  leased  circuits  and  relating  exclu- 
sively to  the  business  for  which  the  circuit  was  leased  are  held  to  be  exempt 
from  tax.     Where,  however,  any  such  leased  circuit  is  used  for  the  trans- 
mission of  messages  other  than  above  stated,  return  for  all  such  messages 
for  which  a  charge  of  15  cents  or  more  would  ordinarily  be  made  must  be 
rendered  monthly  by  the  lessee. 

8.  Messages   or   dispatches   of   officers   and   employees   of   the   company 
concerning  the  affairs  and  service  of  the  company,  and  like  messages  or  dis- 
patches of  officials  and  employees  of  railroad  companies  sent  over  the  wires 
on  their  respective  railroads,  are  exempt  from  tax.    Franked  messages,  if  of 
a  private  character,  for  which  a  charge  of  15  cents  or  more  would  otherwise 
be  charged,  do  not  come  within  the  exemption  above  referred  to,  and  should 
be  included  in  the  return  made. 

9.  Messages  of  officers  and  employees  of  the  United  States  Government 
on  official  business,   and  like  messages   of   State   officials,   are   exempt   from 
tax. 

Messages  or  dispatches  of  officials  and  employees  of  railroad  companies 
sent  over  wires  not  on  their  respective  roads,  for  which  a  charge  of  15  cents 
or  more  is  made  (including  pro  rata  charges  on  messages  sent  in  excess  of 
free  messages  allowed  under  contracts  with  such  railroads),  are  subject  to 
tax. 

A  telegraph  company  is  not  required  to  send  a  message  on  which 
the  sender  has  not  affixed  the  stamp.  Kirk  v.  Western  Union  Tel.  Co., 
90  Fed.  Rep.,  809.  Western  Union  Tel.  Co.  v.  Henley  (1901),  157  Ind.  50. 

TELEGRAPH  AND  TELEPHONE  MESSAGES. 

(54)  Exemption   in   favor   of    dispatches   sent  by    State   officers   in   dis- 
charge of  their  official  duties.     (T.  D.  19704.) 

(55)  Telegraphic  messages  of  railroad  companies  concerning  the  affairs 
and  service  of  the  companies,  when  exempt.     (T.  D.  19794.) 

(56)  Exemption    from    stamp    tax    of    telegrams    of    foreign    diplomatic 
officers  residing  in  this  country.     (T.  D.  20060.) 

(57)  Telegraph  messages  of  associated  steamship  lines,   or  fast  freight 
lines   operating   over   railroads,   not   entitled   to   exemption    from   stamp   tax 
under  section  18,  act  of  June  13,  1898.     (T.  D.  20066.) 

(58)  The  fact  that  an  individual  holds  a  telegraph  frank  has  no  bear- 
ing upon  the  question  of  liability  or  nonliability  to  stamp  tax  of  the  mes- 
sage sent  by  such  frank  holder.     (T.  D.  20066.) 

Bonds.  Bond :  For  indemnifying  any  person  or  persons,  firm,  or  corpora- 

tion who  shall  have  become  bound  or  engaged  as  surety  for  the  pay- 
ment of  any  sum  of  money,  or  for  the  due  execution  or  performance 
of  the  duties  of  any  office  or  position,  and  to  account  for  money 
received  by  virtue  thereof,  and  all  other  bonds  of  any  description 
except  such  as  may  be  required  in  legal  proceedings,  not  otherwise 
provided  for  in  this  schedule,  50  cents. 

INDEMNITY  OR  OTHER  BONDS. 

(59)  Bonds  of  municipal  officers  required  to  be  stamped.     (Vol.  2,  Treas. 
Dec.   (1898),  No.  19686.) 

(60)  Tax  on  renewal  of  bonds  of  fidelity  companies  taking  effect  on  or 
after  July  1,  1898.     (Vol.  2,  Treas.  Dec.    (1898),  No.  19845.) 

(61)  Tax  on  bonds  required  before  a  person  can  enter  on  the  duties  of 
a  State  office  not  a  tax  on  the  functions  of  a  State  government.     (Vol.  1, 
Treas.  Dec.   (1899),  No.  20510.) 

(62)  Bonds  of  notaries  public  are  subject  to  a  tax.     (Vol.  1,  Treas.  Dec. 
(1899),   No.  20547.) 

(63)  Dramshop  bonds.     (United  States  v.  Ambrosini,  vol.  3,  Treas.  Dec. 
(1900),  Int.  Rev.  No.  40.) 

(64)  Bonds    required    in    legal    proceedings.      Bonds    of    administrators, 
executors,  guardians,  and  receivers  appointed  by  the  courts  not  taxable.  (Vol. 
1,  Treas.   Dec.    (1899),    No.  20756.) 

(65)  Opinion  of  the  Attorney  General  that  bonds  given  by  private  in- 

44 


WAR   REVENUE   LAW 

clividuals  secured  by  mortgages  are  taxable  as  bonds  of  any  description  not 
otherwise  provided  for,  and  not  as  promissory  notes.  (Vol.  1,  Treas.  Dec. 
(1899),  No.  20788.) 

(66)  Bonds   given   under  section  3297,   Revised   ^Statutes,   by  officers   of 
State  institutions  for  alchohol  to  be  used  for  scientific  purposes  not  subject 
to  stamp  tax.     (Vol.  1,  Treas.  Dec.   (1899),  No.  20876.) 

(67)  Stamps  required  on  bonds  of  distillers,  brewers,  and  other  manu- 
facturers,   when    given   in    duplicate    or    triplicate,    only    the    original   to    be 
stamped.    Modification  of  Treasury  ruling  No.  19707,  of  July  18,  1898.     (Vol. 
1,   Treas.   Dec.    (1899),    No.   21312.) 

(68)  Guaranties    accompanying   proposals    taxable    the    same    as    bonds. 
(Vol.  2,  Treas.  Dec.    (1899),  No.  21609.) 

(69)  Bonds    of    industry,    and   fidelity    and    guaranty   insurance.      (Vol. 
3,  Treas.  Dec.   (1900),  Int.  Rev.  No.  15.) 

(70)  Warehousing  bonds   taxable   under    Schedule   A,   act   of  June   13, 
1898.      (T.  D.    19609.) 

(71)  Instructions  in  regard  to  stamping  bonds  of  brewers,  manufacturers 
of  tobacco,  manufacturers  of  cigars,  distillers,  etc.     (T.  D.  19707.) 

(72)  Bonds  issued  by  guaranty  companies   in  Canada  guaranteeing  the 
fidelity  of  employees,  individuals,  or  corporations  in  the  United  States.     (T. 
D.  19738.) 

(73)  When  a  bond  is  said  to  be  issued — Whenever  a  corporation  issues 
a  bond  and  there  accrues  to  the  corporation  a  benefit  or  consideration  for 
issuing  the  same  the  bond  is  subject  to  taxation.     (T.  D.  20156.) 

(74)  Bond  or  private  person  secured  by  mortgage   considered  in   rela- 
tion to   opinion   of   the   Attorney   General   and   amendment  to   Schedule   A, 
approved  February  28,  1899.     (T.  D.  20796.) 

(75)  Where  fidelity  or  guaranty  companies  become  sureties  on  bonds", 
tax  is  due  and  payable  whenever  the  premiums  are  paid. — Method  of  paying 
tax.— Tax  on  renewal  of  bonds.     (T.  D.  21666.) 

(76)  The  conveyance  used  under  the  statutes  of  the  State  of  Georgia 
in  cases  where  the  payment  of  a  debt  is  secured  by  pledging  of  real  estate 
is  taxable  under  the  paragraph  in  Schedule  A  relating  to  mortgage  or  pledge. 
—The  "bond  to  reconvey"  is  subject  to  a  tax  of  50  cents.     (T.  D.  21667.) 

(77)  A  bond  filed  by  order  of  court  to  obtain  a  decree  or  order  for 
the  sale  of  real  estate  is  a  bond  given  in  a  legal  proceeding  and  is  exempt 
from  tax. 

(78)  Bonds   given  by  public  officers,   such   as   sheriffs,   clerks,   registers 
or  recorders  of  deeds  treasurers  of  counties,  cities,  or  towns,  or  other  public 
officers  of  like  character  are  required  to  be  stamped. 

(79)  Mere  agreements  to  build  houses  are  not  taxable,  but  if  bonds  are 
included  for  the  faithful  performance  of  work  or  contracts,  they  are  held 
to  be  subject  to  tax  as  bonds. 

(80)  Bonds  issued  by  guaranty   companies  in  Canada  guaranteeing  the 
fidelity  of  employees,   of   individuals,   or   corporations  in  the  United   States, 
executed  and  delivered  in  Canada,  are  not  taxable,  but  if  they  are  not  valid 
until   countersigned    or   delivered   by   the    agent   in   the    United    States,   they 
should  be  stamped. 

(81)  Marriage  bond   requires   a   stamp  of   50   cents. 

(82)  Bonds  "required  in  legal  proceedings"  are  exempt  from  stamp  tax. 

Bonds  required  by  the  City  of  Chicago  or  State  of  Illinois  as  a  con- 
dition precedent  to  granting  a  liquor  license  are  not  taxable.  Ambrosini  v. 
United  States,  187  U.  S.,  1;  United  States  y.  Owens,  100  Fed.  Rep.,  70. 

A  bond  required  by  a  notary  as  qualification  for  office  is  exempt. 
Warwick  v.  Bettman,  102  Fed.  Rep.,  127,  affirmed  108  Fed.  Rep.,  46. 

Certificate  of  profits,  or  any  certificate  or  memorandum  showing     ro|trstifietacte    of 
an  interest  in  the  property  or  accumulations  of  any  association,  com- 
pany, or  corporation,  and  on  all  transfers  thereof,  on  each  $100  of 
face  value  or  fraction  thereof,  2  cents. 

45 


WAR   REVENUE   LAW 


Certificate  of  Certificate  :  Any  certificate  of  damage,  or  otherwise,  and  all  other 
certificates  or  documents  issued  by  any  port  warden,  marine  sur- 
veyor, or  other  person  acting  as  such,  25  cents. 

Certificates  Certificate  of  any  description  required  by  law  not  otherwise  speci- 

not    enumerated.  1Q 


CERTIFICATES. 

(83)  Liability   for  recording  or  registering  documents   required  by  law 
to  be  stamped,  unless  stamps  are  affixed  and  canceled.     (T.  D.  19681.) 

(84)  Certain    certificates    made    by    national    banking    associations    not 
liable.     (T.  D.  19698. 

(85)  Stamping  certificates  of  damage  to  vessels,  25-cent  stamp  required 
on  originals  but  none  on  copies.     (T.  D.  19706.) 

(86)  Letters  of  administration  and  other  probate  papers,  certificates  of 
sale   for   unpaid   taxes,   and   certificates   of    redemption,   no    stamp    required. 
(T.  D.   19837.) 

(87)  Teachers'  certificates  issued  by  State  or  county  officers  do  not  re- 
quire a  stamp  —  Certificates  required  by  law,  issued  by   State  officers  at  re- 
quest of  private  persons,   solely  for  private   use,   require  a   stamp.      (T.   D. 
19883.) 

(88)  Certificates   of   inspection  of   steam  vessels  and  all   copies  thereof 
are  exempt  from  taxation.     (T.  D.  20387.) 

(89)  Certificates   of   authority   issued  to   insurance   agents  by   State   of- 
ficers are  subject  to  taxation,  and  the  rate  imposed  is  10  cents  on  each  certifi- 
cate.    (T.  D.  20551.) 

(90)  Certificates  as  to  use  of  alcohol  withdrawn   from  bond   for   scien- 
tificate  purposes  under  section  3297,  Revised  Statutes,  held  to  be  not  subject 
to  ;gtamp  tax  under  act  of  June  13,  1898.     (T.  D.  20980.) 

(91)  Certificates  attached  to  depositions  to  be  used  in  legal  proceedings 
not  taxable.     (T.  D.  9.) 

Following  rulings  are  taken   from  supplement  to  Internal  Revenue  Cir- 
cular No.  503,  dated  August  16,  1898: 

(92)  Certificates   required  by   law   issued   by  any   department  or   officer 
of  the  Government  at  the  request  of  private  persons,  solely  for  private  use, 
should  be  stamped.     The  stamp  should  be  furnished  by  the  person  applying 
for  the  instrument  and  for  whose  use  and  benefit  the  same  is  issued,  and 
should  be  affixed  before  the  document  is   delivered. 

(93)  Certificates  of  officers  of  the  United  States  given  in  the  discharge 
of   official    functions   necessary   in   carrying  on   the   machinery   of   the   Gov- 
ernment are  exempt. 

(94)  Certificates  issued  by  an  officer  of  the  State,  in  the  interest  of  the 
State,  are  not  liable  to  tax. 

(95)  Any  documents,   the   stamping  of  which   would   make  it  necessary 
that  the  State  should   furnish  and  affix  the  stamp,  are  held  to  be  exempt 
from  the  stamp  tax. 

(96)  Return  of  birth,  certificate  of  death,  and  certificates  of  the  regis- 
trar as  to  the  facts  declared  concerning  birth,  marriage,  and  death  are  none 
of  them  held  to  be  subject  to  the  stamp  tax  imposed  upon  certificates,   in 
view  of  the  fact  that  these  certificates  are  given  in  pursuance  of  State  laws 
for  public  purposes. 

(97)  Certificates  issued  by  the  health  officer  of  New  York,  under  State 
statute,    relative  to  the   employment   of   children,   are   exempt,    being   issued 
in  the   discharge  of  a  duty   connected   with   the   operations   of  the   Govern- 
ment. 

(98)  A   marriage   certificate,   to  be   returned  to   any  officer   of   a   State, 
county,  city,  or  town,  to  constitute  part  of  a  public  record,  requires  no  stamp. 
A  marriage  certificate  issued  by  the  officiating  clergyman  or  magistrate  and 
given  to  the   parties,  if   required  by   law,   must   be   stamped   at  the   rate  of 
10  cents. 

(99)  A  teacher's  certificate  issued  by  a  county  superintendent  of  public 
instruction  or  other  officer  of  State,  county,  or  municipality  comes  within  the 
exemption  provided  by  section  17  of  the  act,  and  does  not  require  a  stamp. 

46 


WAR   REVENUE   LAW 

These  certificates,  given  under  regulations  adopted  in  connection  with  public 
schools,  are  held  to  be  for  governmental  purposes  rather  than  for  private 
use. 

(100)  A  mercantile  license  or  liquor  dealer's  license,  being  a  certificate 
required  by  the  law  of  a  State  or  ordinance  of  a  city  in  the  exercise  of  the 
functions  governmental,   taxing,  or   municipal   of   the    State   or  corporation, 
comes  within  the  exemption. 

(101)  Inspectors    and    weighers    of    grain    who    give    certificates    under 
State  laws  are  not  required  to   stamp  such  certificates.     They  are  exempt 
under  section  17. 

(102)  No  stamp  is  required  upon  certificates  of  the  sufficiency  of  sure- 
ties  upon   bonds. 

(103)  A  stamp  is  required  on  a  certificate  of  incorporation. 

(104)  The    certificate    of    a    clerk    of    court    to    the    qualifications    of    a 
notary  public,  or  justice  of  the  peace,   is   held  to  be  a  certificate   requiring 
a  stamp. 

(105)  An    architect's    certificate    requires    no    stamp,    unless,    by    an    in- 
dorsement,   it  becomes   an   order   for  the  payment   of   money. 

(106)  A    certificate    of    acknowledgment    to    a    deed    where    the    con- 
sideration  of  the   deed   is   $100   or   less,   or   to   a   mortgage   where   the   con- 
sideration is  $1,000  or  less,  does  not  require  a  stamp.     (See  also  No.  119.) 

(107)  Certificates  issued  at  tax  sale  or  certificates  of  redemption  from 
tax   sale   do   not   require   stamps. 

(108)  Certificate  of   "proof  of  loss"   for  use  of  an  insurance  company, 
being  a  statement  made  as  to  the  facts  and  circumstances  attending  a  fire, 
is  not  a  certificate  requiring  a  stamp. 

(109)  Certificates    required   by   law,    which    are   made    by    court    officers 
unnder  the  direction  and  authority  of  the  court,  and  which  are  necessary  to 
give  proper  effect  to  the  court  proceedings,  are  exempt. 

(110)  Court  processes,   such   as   summonses,    writs   of   attachment,    sub- 
poenas, warrants,  orders  of  court,  etc.,  are  not  required  to  be  stamped. 

(111)  Certificates    of    protest    of    every    note,    bill    of    exchange,    etc., 
whether  protested  by  a  notary  public  or  by  any  officer  duly  authorized  by 
law,  must  be  stamped. 

Rulings  from  Circular  No.  503,  revised  November  14,  1898 : 

(112)  "Certificates    of    any    description    required    by    law    not   otherwise 
specified    in   this   act,    10   cents."     The    first    requirement    necessary    to    sub- 
ject  any   given   certificate   thus   generally    described    to    tax   is   that   it   shall 
be  one  which  is  required  to  be  given  by  law,  national,  State,  or  municipal. 
All    such   are   taxable   those   coming   within   the   exemption   of    section    17 — 
that  is  to  say,  those  which  are  given  strictly  in  the  exercise  of  the   func- 
tions— govermental,   taxing,   or   municipal — of   the    State   or   corporation. 

(113)  Certificates  given  by  an  officer,  not  for  a  public  or  governmental 
purpose,  but  for  private  interests  and  use,  are  liable  to  the  tax  if  they  are 
given  in  obediance  to  any  law  which  requires  them  to  be  given  when  called 
for. 

(114)  A   certificate   of   search   showing  that  the   dockets   or   records   of 
a   court   have   been    searched,   and    show    either   that   lines    exist   or    do   not 
exist  as  to  property,   or  that  judgments   are  recorded  or  are  not  recorded, 
and  also  certificates  of  search  to  ascertain   whether  or  not  titles  are  good, 
whether  taxes  have  been   paid,   and  other  certificates  of  this   character  are 
not   such  as   are   required   in   the   general   discharge   of   governmental    func- 
tions on  the  part   of  the  officers  giving  them,  but   are   such  as  are  needed 
for    private    use    and    private    interests,    and    are,    therefore,    subject    to    the 
tax,  as  being  required  by  law  to  be  given  when  called  for. 

(115)  If   the  act   performed,   or   the   certificate  issued   by   the   officer   is 
in  the  discharge  of  an  official   function   necessary  in  operating  the   general 
machinery  of   the   Government,   it  is   exempt. 

(116)  Certificates  of  acknowledgment  of  deeds   and  mortgages   are  not 
required  to  be  stamped.     The  memorandum  on  the  back  of  a  deed  or  mort- 
gage, made  by  the  register  or  recorder,  that  the  instrument  has  been  placed 
upon   record,  is  not  subject  to  taxation.     It  is  not  a   certificate   such   as   is 
contemplated  by  the  law.     It  is   a  brief  note  on  the  back  of   the   deed   or 
mortgage  citing  date  of  filing  and  date  and  place  of  record. 

47 


Brokers' 
tract.    * 


WAR   REVENUE   LAW 

(117)  Certificates  of  birth,  marriage,  and  death,  given  in  pursuance  of 
the  laws  of  the  State  requiring  the  collection  and  registration  of  vital 
statistics  as  a  basis  for  the  administration  of  public  health  laws,  come 
within  the  exemption  of  section  17.  Such  certificates,  however,  when  is- 
sued to  private  persons  for  private  use,  are  subject  to  the  10-cent  stamp 
tax. 

Contract :  Broker's  note,  or  memorandum  of  sale  of  any  goods  or 
merchandise,  stocks,  bonds,  exchange,  notes  of  hand,  real  estate,  or 
property  of  any  kind  or  description  issued  by  brokers  or  persons 
acting  as  such,  for  each  note  or  memorandum  of  sale,  not  otherwise 
provided  for  in  this  Act,  10  cents. 


Conveyance. 


CONTRACTS. 

(118)  The   original  note   or   memorandum   of    sale    is   alone   subject   to 
the  tax   of   10  cents   when   made   by   a  broker   or   one  acting  as   such,   and 
the  tax  in  payable  by  said  broker  or  one  acting  as  such;  the  duplicate  or 
the  copy  of  the  original  memorandum   of   sale  is   not  taxed. 

(119)  A    mere    memorandum    accompanying    an    offer    to    purchase    is 
subject    to    the    tax    only    provided    the    offer    is    accepted,    and    should    be 
stamped   by   the   broker   on  the  acceptance   of   the   offer. 

(120)  A  statement  of  account  showing  the  receipts  and  disbursements 
in   connection   with    a    sale,   and   not   being    the    contract   of    sale,    does    not 
require  a  stamp. 

(121)  A  broker's  memorandum  of  a  sale  of  promissory  notes    ("notes 
of   hand")    requires   the   10-cent   stamp. 

Conveyance :  Deed,  instrument,  or  writing,  whereby  any  lands, 
tenements,  or  other  realty  sold  shall  be  granted,  assigned,  trans- 
ferred, or  otherwise  conveyed  to,  or  vested  in,  the  purchaser  or  pur- 
chasers, or  any  other  person  or  persons,  by  his,  her,  or  their  direc- 
tion, when  the  consideration  or  value  of  the  interest  or  property 
conveyed,  exclusive  of  the  value  of  any  lien  or  encumbrance  thereon, 
exceeds  $100  and  does  not  exceed  $500,  50  cents;  and  for  each  addi- 
tional $500  or  fractional  part  thereof  in  excess  of  $500,  50  cents: 


(T.  D.  2042.) 

Emergency  revenue  law — Stamp  tax  on  deeds. 

Deeds  delivered  on  and  after  December  1,  1914,  must  be  stamped.  Registers 
and  recorders  are  required  to  take  ^notice  that  instruments  are  stamped 
before  accepting  for  record. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  November  31,  1914. 

SIR:  This  office  is  in  receipt  of  your  letter  of  the  27th  instant,  in  which 
you  request  to  be  informed  if  it  would  be  necessary,  under  the  internal- 
revenue  act  of  October  22,  1914,  to  attach  stamps  to  a  deed  of  real  property 
dated,  executed,  and  acknowledged  prior  to  December  1,  1914,  and  also 
delivered  prior  to  that  date  to  a  third  party  for  account  of  the  grantee 
named  in  the  deed,  the  delivery,  however,  from  such  third  party  to  the 
grantee  named  in  the  deed  taking  place  subsequent  to  December  1,  1914. 

In  reply,  you  are  informed  that  the  deed  should  be  stamped  before  de- 
livery, which  takes  place  after  the  law  goes  into  effect. 

You   also   request   to   be   informed   if    a   deed    delivered   to   the    grantee 

48 


WAR   REVENUE   LAW 

named  therein  subsequent  to  December  1,  1914,  could  be  recorded  without  the 
recording  officer  being  required  to  see  that  stamps  were  attached. 

In  reply  to  this  inquiry  you  are  informed  that  section  13  of  the  act 
reads  as  follows : 

That  it  shall  not  be  lawful  to  record  or  register  any  instrument,  paper, 
or  document  required  by  law  to  be  stamped  unless  a  stamp  or  stamps  of 
the  proper  amount  shall  have  been  affixed  and  canceled  in  the  manner  pre- 
scribed by  law. 

As  this  section  of  the  law  will  become  effective  December  1,  1914,  reg- 
isters and  recorders  will  be  required  on  and  after  that  date  to  take  notice 
that  all  instruments  required  to  be  stamped  are  stamped  before  accepting  same 
for  record. 

Respectfully, 

ROBT.  WILUAMS,  JR., 

Acting  Commissioner  of  Internal  Revenue. 
Mr. . 

Provided,  That  nothing  contained  in  this  paragraph  shall  be  so 
construed  as  to  impose  a  tax  upon  any  instrument  or  writing  given 
to  secure  a  debt. 


CONVEYANCES. 

(122)  Referee's  deed.     Decision  of  New  York  Supreme  Court.      (Lor- 
ing  v.  Chase,  Vol.  1,  Treas.  Dec.   (1899),  No.  2079*4.) 

(123)  A    conveyance    of    realty    by   a   master    commissioner    must    have 
necessary  stamps  to  be   receivable    for  record.      (Farmers'   Loan  and  Trust 
Co.   v.    Council    Bluffs    Gas   and   Electric   Light   Co.      (1898,)    90    Fed.,    806. 
Vol.    1,    Treas.    Dec.    (1899),    No.    20952.) 

(124)  Taxation    of    conveyances    of    realty    sold    subject    to    mortgage. 
Decision  of  Judge  Taft  in  United   States   Circuit  Court   for   Southern  Dis- 
trict of  Ohio  considered.     (Vol.  1,  Treas.  Dec.   (1899),  No.  21314.) 

(125)  Escrow    deeds    are    not    subject    to    taxation    until    final    delivery. 
(Vol.  2,  Treas.  Dec.    (1898),   No.  20096.) 

(126)  A  contract  for  deed  used  in  selling  real  estate  is  not  subject  to 
stamp  tax.     (Vol.  2,  Treas.  Dec.   (1898),  No.  20065.) 

(127)  Releases    of    mortgages    and    deeds    of    trust   operating   as    mort- 
gages are  not  subject  to  taxation,  no  matter  in  what  form  they  are  executed. 
(Vol.    2,    Treas.    Dec.     (1898),    No.    20440.) 

(128)  Deeds  of  masters  in  chancery  are  required  to  be  stamped.     (Vol. 
2,    Treas.    Dec.    (1898),    No.    20311.) 

(129)  Warranty    deed    with    vendor's    lien    taxed    as    a    conveyance    of 
land.     No  mortgage  tax  imposed  thereon.     (Vol.  2,  Treas.  Dec.   (1898),  No. 
20320.) 

(130)  When   a   partition    deed   is    operative    in   defining   boundary   lines 
or  in  showing  by  location  each  tenant  in  common's  interest,  no  tax  accrues. 
(Vol.  1,  Treas.  Dec.    (1899),  No.  20792.) 

(131)  A    deed    or    mortgage    executed    and    delivered    prior    to    July    1, 
1898,  is  subject  to  stamp  tax  when  offered  for  registration  after  that  date 
in    States    where,    by   State    law,    registration    is    necessary    to    pass    title   or 
establish  valid  lien.     (Vol.  1,  Treas.  Dec.    (1899),   No.  20838.) 

(132)  Conveyance  of  a  mine  located  on  unpatented  land   is   subject  to 
taxation.      (Vol.    1,    Treas.    Dec.    (1899),    No.    20986.) 

(133)  Decision  construing  the  clause  in   Schedule  A  relative  to   stamps 
on  conveyances.    United  States  Circuit  Court,  Western  District  of  Missouri. 
(Vol.  3,  Treas.  Dec.  (1900),  Int.  Rev.  No.  51.) 

(134)  Deeds   of   conveyance  executed  by  and   between   tenants  in   com- 

49 


WAR   REVENUE   LAW 


Entry  of  goods 
at  Custom 
House. 


Withdrawal. 


mon    not    taxable.     Deeds    of    conveyance    executed    by    and    between    joint 
tenants   taxable.      (Vol.    1,    Treas.    Dec.    (1899),    No.    21283.) 

(135)  Conveyance  of  realty  to  trustees  or  other  persons  without  a  valu- 
able consideration  not  taxable.     (Vol.  3,  Treas.  Dec.    (1900),  Int.  Rev.   No. 
52;  Circular  555,  Mar.  9,  1900.) 

(136)  A  deed  of  conveyance  conveying  real  estate  that  lies  in  countries 
that  are  not  United  States  territory  is  not  subject  to  taxation,  though  the 

frantor    and    grantee    may    both    be    citizens    and    residents    of    the    United 
tates.     (Vol.  2,  Treas.  Dec.   (1899),  No.  21562.) 

(137)  Deeds    that   are    simply   confirmatory    and    do    not    vest   title    not 
already  vested  are  exempt  from  tax;  same  as  to  deeds  of  partition.      (Cir- 
cular No.  503,  2d  revision.     Compilation  of  decision  for  year  1899,  p.  293.) 

(138)  If  a  deed  does  not  grant,  assign  transfer,  or  convey  to  the  pur- 
chaser any  lands,   tenements,   or  other  realty,   but  only  the   right  to  burial, 
to  erect  monuments,  etc.,  it  does  not  require  a  stamp.      (T.  D.  19838.) 

(139)  The  words  of  purchase  in  the  paragraph  of  the  law  relating  to 
stamps  on  conveyances  include  all   changes  of  title   except  those   occurring 
by  descent  or  operation  of  law.     (T.  D.  20195.) 

Modified  by  circular  555  of  March  9,  1900.  Only  those  where  a  valu- 
able consideration,  capable  of  estimation  in  money  value,  passes. 

(140)  Quitclaim   deed   taxable   according  to   value   of    the   property    in- 
terest conveyed.      (T.   D.   20232.) 

(141)  Contracts    for    sale    of    land   taxable    if    they   vest    title;    if    pro- 
vision  is  made   for  future  delivery  of  deed,   they  are  not  taxable.      (T.  D. 
20310.) 

(142)  Ground-rent    deed    incorporated    in    the    following    ruling   taxable 
as  a   conveyance  and  not  as  a  lease.      (T.   D.   21537.) 

(T.  D.  2060.) 

Emergency  revenue  law — Stamp  tax  on  deeds  and  mortgages. 

Stamp  required  on  bond  accompanying  a  mortgage ;   stamp  not  required  on 

certificate  of  officer  taking  acknowledgment  of  deeds  and  mortgages. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  November  20,  1914. 

SIR:  This  office  has  received  letters  from  parties  in  your  district  making 
inquiries  in  regard  to  stamp  tax  on  deeds  and  mortgages  under  the  internal- 
revenue  act  of  October  22,  1914. 

You  are  informed  that  a  stamp  is  required  upon  the  bond  accompanying 
a  mortgage.  It  comes  under  the  provision  for  stamp  tax  of  50  cents  on  all 
bonds  of  any  description,  except  such  as  may  be  required  in  legal  proceed- 
ings. A  stamp  is  not  required  upon  the  certificate  of  the  officer  taking  ac- 
knowledgment of  deeds  and  mortgages. 

Respectfully, 

ROBT.  WILUAMS,  JR., 

Acting  Commissioner  of  Internal  Revenue. 
Mr. . 

NOTE.— The  act  of  June  13,  1898,  taxed  conveyances  upon 
the  whole  value  of  the  consideration,  while  the  act  of  October 
22,  1914,  taxes  such  instruments  on  the  value  exclusive  of  the 
value  of  any  lien  or  incumbrance  thereon. 

Entry  of  any  goods,  wares,  or  merchandise  at  any  customhouse, 
either  for  consumption  or  warehousing,  not  exceeding  $100  in 
value,  25  cents ;  exceeding  $100  and  not  exceeding  $500  in  value 
50  cents;  exceeding  $500  in  value,  $1. 

Entry  for  the  withdrawal  of  any  goods  or  merchandise  from  cus- 
toms bonded  warehouse,  50  cents. 

CUSTOMHOUSE    ENTRIES. 

143)   btamps  on  customhouse  entries,  bonds,  etc.     (T.  D.  19605  ) 

50 


WAR   REVENUE   LAW 

Insurance  :  Each  policy  of  insurance  or  other  instrument,  by  what-  jc£?surance  po1" 
ever  name  the  same  shall  be  called,  by  which  insurance  shall  be 
made  or  renewed  upon  property  of  any  description  (including  rents 
or  profits),  whether  against  peril  by  sea  or  on  inland  waters,  or  by 
fire  or  lightning,  or  other  peril,  made  by  any  person,  association,  or 
corporation,  upon  the  amount  of  premium  charged,  one-half  of  1 
cent  on  each  dollar  or  fractional  part  thereof  : 

(T.  D.  2043.) 

Emergency  revenue  lazv  —  Policies  of  fire  insurance. 
Stamp  tax  on  policies  of  fire  insurance  under  act  of  October  22,  1914. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  November  6,  1914. 

SIR:  This  office  is  in  receipt  of  your  letter  of  the  6th  instant  in  regard 
to  stamp  tax  on  policies  of  fire  insurance  under  the  act  of  October  22,  1914. 
You  desire  a  ruling  on  policies  made,  signed,  and  issued  by  brokers  and 
agents  prior  to  December  1,  3914,  on  renewals  of  business  expiring  after 
December  1,  1914.  A  policy  does  not  require  a  stamp  until  it  is  issued.  If 
the  policy  is  issued  in  due  course  of  business,  delivered  and  accepted  in  such 
a  way  as  to  be  legally  binding  upon  the  parties  before  December  1,  1914,  it 
would  not  be  subject  to  the  tax  imposed  by  the  recent  act. 

Respectfully, 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


(T.  D.  2062.) 

Emergency  revenue  law  —  Stamp  taxes. 

Stamp  tax  on  bonds  and  policies  of  insurance. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF   INTERNAL  REVENUE, 

Washington,  D.  C.,  November  20,  1914. 

SIR:  This  office  is  in  receipt  of  your  letter  of  the  19th  inst.,  in  regard 
to  the  stamp  tax  on  bonds  and  policies  of  insurance  under  Schedule  A,  act 
of  October  22,  1914,  effective  December  1.  The  ruling  of  this  office  is  as 
follows  : 

Had  Congress  made  no  other  provision  for  the  taxation  of  bonds  except 
in  the  language  here  quoted,  every  bond,  in  its  broadest  term,  would  have 
been  subject  to  but  one  tax  fixed  specifically  at  50  cents. 

Following  this,  however,  and  under  the  head  of  "Insurance,"  the  law 
says  :  . 

"Each  policy  of  insurance,  or  bond,  or  obligation  of  the  nature  of  indem- 
nity for  loss,  damage,  or  liability  issued,  or  executed,  or  renewed  by  any 
person,  association,  company,  or  corporation,  transacting  the  business  of 
fidelity,  employer's  liability,  *  *  *  or  other  branch  of  insurance,  *  *  * 
and  each  bond  undertaking  or  recognizance,  conditioned  for  the  performance 
of  the  duties  of  any  office  or  position,  or  for  the  doing  or  not  doing  of  any- 
thing therein  specified,  or  other  obligation  of  the  nature  of  indemnity,  *  *  * 
upon  the  amount  of  premium  charged,  one-half  of  1  cent  on  each  dollar  or 
fractional  part  thereof." 

There  appears  to  be  no  ambiguity  or  difficulty  of  interpretation  or  recon- 
ciliation of  the  two  provisions  of  this  act. 

First.     Every  bond  of  every  description  and  kind,  in  its  broadest  sense 


WAR   REVENUE   LAW 


panics  exempted. 


and  meaning,  without  regard  to  its  form,  where  sureties  are  added,  for  in- 
demnifying any  person  or  corporation,  government  or  otherwise,  is  subjqc 
to  the  50  cent  tax  if  the  sureties  consist  of  any  person,  corporation,  or  other 
entity,  except  "persons,  companies  or  corporations  transacting  the  business 
of  fidelity,  etc.,  insurance." 

Second.  If  the  sole  surety  or  sureties  upon  any  bond  undertaking, 
recognizance"  of  any  character,  kind  or  description,  "conditioned  for  the 
performance  of  the  duties  of  any  office  or  position,  or  for  the  doing  or  not 
doing  of  anything  therein  specified,  or  other  obligation  of  the  nature  of  in- 
demnity," is  executed  or  guaranteed  by  any  liability,  fidelity,  or  guaranty  or 
surety  company,  the  tax  upon  the  amount  of  premium  charged  is  one-half  of 
1  cent  on  each  dollar  or  fractional  Dart  thereof,  and  no  other  tax  of  any 
character  or  kind  is  required  to  be  paid  upon  such  bond,  undertaking,^  agree- 
ment, or  clause  made  for  the  purpose  of  indemnifying  any  person,  Govern- 
ment, or  any  other  thing. 

This  office  will  not  be  governed  by  any  interpretation,  regulation,  or 
ruling  of  construction  on  this  subject  made  under  the  similar  provisions  of 
the  war  revenue  act  of  1898  inconsistent  with  the  above. 

Respectfully, 

ROBT.  WILLIAMS,  JR., 
Acting  Commissioner  of  Internal  Revenue. 

Mr.  --  . 

Co  -  operative  Provided,  That  purely  cooperative  or  mutual  fire  insurance  com- 
panics  or  associations  carried  on  by  the  members  thereof  solely  for 
^  protection  of  their  own  property  and  not  for  profit  shall  be 
exempted  from  the  tax  herein  provided  : 

And  provided  further,  That  policies  of  reinsurance  shall  be  ex- 
empt from  the  tax  herein  imposed  by  this  paragraph. 

INSURANCE  —  MARINE,   FIRE,  UGHTNING,  ETC. 

(144)  Tax    on    insurance    policies    issued    by    foreign    insurance    com- 
panies having  agencies  in  the  United  States.     (Vol.  2,   Treas.  Dec.    (1898), 
No.   20034.) 

(145)  Fire    insurance    policy,    when    assigned    or    transferred,    taxed    in 
proportion   to   the   unearned   premium.      (Vol.    2,    Treas.    Dec.    (1898),    No. 
20068.) 

(146)  Policies    of    insurance     (marine)     issued    by    foreign    companies 
having  no  established  agencies   in  the  United   States  are  nevertheless    sub- 
ject to  the  stamp  tax  when  obtained  by  or  through  insurance   brokers   re- 
siding in  this  country.      (Vol.   2,  Treas.  Dec.    (1898),   No.   20259.) 

(147)  Stamps  must  be  affixed  to  premium  notes  as  well  as  to  policies. 
(T.  D.  19620.) 

(148)  Ruling    as    to    mutual    insurance    companies  —  In    what    cases    ex- 
emption applies.      (T.   D.   19651.) 

(149)  Policies  of  mutual  insurance  companies,  when  taxable  and  when 
exempt  —  When  the  receipts  of  the  company  are  invested  and  profit  accrues 
the  policies   are   subject  to   taxation.      (T."  D.  20020.) 

Re-insurance*  policies  need  not  be  stamped.     22  A.  G.,  Op.  318;  376. 
The  tax  is   on   the   policies   and  not  applications   therefor.     23   A.   G., 
Op.  211. 

Each  policy  of  insurance,  or  bond  or  obligation  of  the  nature  of 
indemnity  for  loss,  damage,  or  liability  issued,  or  executed,  or  re- 
newed by  any  person,  association,  company,  or  corporation,  trans- 
acting the  business  of  fidelity,  employer's  liability,  plate  glass,  steam 
boiler,  burglary,  elevator,  automatic  sprinkler,  or  other  branch  of 
insurance  (except  life,  personal  accident,  and  health  insurance,  and 
insurance  described  and  taxed  or  exempted  in  the  preceding  para- 
graph and  excepting  also  workmen's  compensation  insurance  carried 

52 


Casualty,  fidei- 
tee  insurance?"" 


WAR   REVENUE   LAW 

on  by  the  members  thereof  solely  for  their  own  protection  and  not 
for  profit),  and  each  bond  undertaking  or  recognizance,  conditioned      Bond     under- 
for  the  performance  of  the  duties  of  any  office  or  position,  or  for  n1zance.°r 
the  doing  or  not  doing  of  anything  therein  specified,  or  other  obliga- 
tion of  the  nature  of  indemnity,  and  each  contract  or  obligation 
guaranteeing  the  validity  or  legality  of  bonds  or  other  obligations      Contract  of 
issued  by  any  State,  county,  municipal,  or  other  public  body  or   udiatyanofe'bonds] 
organization,   or   guaranteeing  titles   to   real    estate  or   mercantile   etc- 
credits  executed  or  guaranteed  by  any  liability,  fidelity,  guarantee, 
or  surety  company  upon  the  amount  of  premium  charged,  one-half 
of  1  cent  on  each  dollar  or  fractional  part  thereof. 

Provided,  That  policies  of  reinsurance  shall  be  exempt  from  the 
tax  herein  imposed  by  this  paragraph. 

INSURANCE — CASUALTY,     FIDELITY,    AND     GUARANTEE. 

(150)  When    the    policies    should   be    stamped   as   policies    of    insurance 
and  not  as  bonds.     (T.  D.  20781.) 

(151)  Bonds  of  indemnity,  and  fidelity  and  guaranty  insurance.      (Vol. 
3,  Treas.  Dec.    (1900),  Int.  Rev.  No.  15.) 

Passage  ticket,  for  each  passenger,  sold  in  the  United  States      Passage,  ticket 

e  ,  ,±(.°.  ,...to  foreign  ports. 

for  passage  by  any  vessel  to  a  foreign  port  or  place,  if  costing 
not  exceeding  $30,  $1 ;  costing  more  than  $30  and  not  exceeding 
$60,  $3  ;  costing  more  than  $60,  $5  : 

Provided,  That  such  passage  tickets,  costing  $10  or  less,  shall  be 
exempt  from  taxation. 

0 

(152)  Revocation  of  ruling  that  tickets  issued  in  Canada  for  passage 
on  a  vessel  sailing  from  a  United  States  port  are  not  subject  to  stamp  tax. 
(Vol.  2,  Treas.  Dec.   (1898),  No.  20004.) 

(153)  Members    of    foreign    diplomatic    corps    are    not   required    to    pay 
tax  on  passage  tickets   by  vessel    from   a  port  in   the   United   States   to   a 
foreign  port.     (Vol.  2,  Treas.  Dec.   (1898),  No.  20196.) 

(154)  If   one   ticket  only   is    issued,   though   it   contains    several   names, 
only  one  stamp  tax  required.     Circular  503,  revised  November  14,  1898. 

No  stamp  on  rebate  checks  given  to  passengers  who  pay  their  fare 
on  the  train  is  required.  22  A.  G.,  Op.  248. 

Power  of  attorney  or   proxy  for  voting-  at  any  election  for   .  Power  of  At- 

/v.  -  i  •  torney,  proxy  to 

officers  or  any  incorporated  company  or  association,  except  re-  vote, 
ligious,   charitable,   or   literary   societies,   or   public   cemeteries, 
10  cents. 

Power  of  attorney  to  sell  and  convey  real  estate,  or  to  rent  or      Power  of  At- 
lease  the  same,  to  receive  or  collect  rent,  to  sell  or  transfer  any   ney  t( 
stock,  bonds,  scrip,  or  for  the  collection  of  any  dividends  or  in- 
terest thereon,  or  to  perform  any  and  all  other  acts  not  herein- 
before specified,  25  cents : 

Where  securities  are  pledged  with  power  to  sell  in  case  of  default 
such  instrument  is  not  taxable  as  a  power  of  attorney.  22  A.  G.,  Op.  218. 

A  certificate  authenticating  the  official  acts  of  a  Notary  Public  engaged 
in  taking  depositions  to  be  used  in  evidence  before  a  judicial  tribunal 
is  not  taxable.  Stirneman  v.  Smith,  100  Fed.  Rep.,  435. 

A  warrant  or  clause  attached  to  or  printed  in  a  promissory  note 
authorizing  an  attorney  to  confess  judgment  for  the  maker  is  not 
taxable  as  a  power  of  attorney  under  this  paragraph.  Treat  v.  Tolman, 
113  Fed.  Rep.,  892. 

53 


WAR    REVENUE    LAW 

Provided,  That  no  stamps  shall  be  required  upon  any  papers  nec- 
essary to  be  used  for  the  collection  of  claims  from  the  United 
States  for  pensions,  back  pay,  bounty,  or  for  property  lost  in 
the  military  or  naval  service. 

POWER   OF   ATTORNEY   OR   PROXY. 

(155)  An    instrument    authorizing    the    secretary    to    transfer    stock    on 
the  books  of  the  company  held  not  to  be  taxable  as  a  power  of  attorney. 
(Vol.   2,   Treas.   Dec.    (1899),    No.   21467.) 

(156)  An  instrument   appointing  an   attorney  in   fact  to  transfer   stock 
on  the  books  of  the  company  requires  to  be  stamped  as  a  power  of  attorney, 
but   an  instrument   authorizing  the   secretary  to   make   the   transfer   is   held 
not  to  be  a   power  of  attorney.      (Vol.   2,  Treas.   Dec.    (1899),   No.  21563.) 

(157)  Proxies — Contracts — Receipts — Sales     of     certificates     of     stock — 
Powers  of  attorney,  etc.     (T.  D.  19700.) 

(158)  Where   judgment    notes,    so   called,    contain    a   clause    authorizing 
any  attorney  at  law  to  confess  judgment  in  favor  of  the  holder  of  the  note, 
such  authorization  is  held  to  be  a  power  of  attorney,  and  taxable  as  such, 
in  addition  to  the  tax  required  on  the  judgment  note  as  promissory   note. 
(Cir.  No.   503,   revised   November   14,   1898.) 

(159)  Powers   of   attorney   to   sell   or   transfer    Government   bonds   are 
taxable.     (Cir.  No.  503,  revised  November  14,  1898.) 

Protest:  Upon  the  protest  of  every  note,  bill  of  exchange, 
acceptance,  check  or  draft,  or  any  marine  protest,  whether  pro- 
tested by  a  notary  public  or  by  any  other  officer  who  may  be 
authorized  by  the  law  of  any  State  or  States  to  make  such 
protest,  25  cents. 

PROTESTS. 

No  Rulings  Found. 

BERTHS  AND   SEATS  IN    SLEEPING  OR   PARLOR  CARS. 

™e  car       Every  seat  sold  in   a  palace  or   parlor  car   and   every  berth 
'•   sold  in  a  sleeping  car,  1  cent,  to  be  paid  by  the  company  selling 
the  same. 

Tax  on  Sales  of  Seats  or  Berths  in  Palace,  Parlor,  or  Sleeping 

Cars. 

Until  otherwise  provided,  every  railroad  company  or  other  company 
owning  or  operating  any  palace  or  parlor  car  or  sleeping  car  will,  after 
January  1,  1915,  and  not  later  than  the  20th  day  of  each  month,  render  to 
the  collector  of  internal  revenue  of  the  district  in  which  its  principal  office  is 
located  a  sworn  return  of  the  number  of  seats  or  berths  in  any  such  car  sold 
by  it  during  the  preceding  month,  and  will  pav  to  said  collector  the  tax 
imposed  by  the  revenue  act  of  October  22,  ,1914,  of  1  cent  on  each  seat  or 
berth  so  sold. 


Protest. 


54 


WAR   REVENUE   LAW 

The  return  to  be  rendered  in  such  cases  will  be  in  the  following  form: 

(Form   674.) 

UNITED    STATES    INTERNAL    REVENUE. 

Return  of  sales  of  seats  and  berths  in  palace,  parlor,  or  sleeping  cars  taxable 
under  act  of  October  22,  1914. 

District  of , 

,   191... 

The  undersigned,  ,  of  the 

(President    or    chief    officer.)  (Here    give    name    of    company.) 

having  its  principal  office  at ,   State  of 

,  hereby  certifies  that  the  said  company  owns  or  controls  certain 

palace,  parlor,  and  sleeping  cars  in  use  on  its  or  other  railroad  lines,  and 

that  during  the  month  of  191.  . .,  the  total  number  of  seats  or 

berths   in   said   cars    sold   by   or    on   account   of   this    said   company   was    as 
follows : 

Total  number  of  seats  sold 

Total  number  of  berths  sold •  • , 


Total  of  seats  and  berths   sold 
Amount  of   tax   due 


(Title.) 

Subscribed  and  sworn  to  before  me  this ...  .day  of ,  191. . 

[SEAL.] 


SCHEDULE  B 

Perfumery  and  cosmetics  and  other  similar  articles :     For  and      Perfumes  and 
upon   every  packet,  box,  bottle,  pot,   phial,   or   other  inclosure   sfmSar^ai-ticks 
containing  any  essence,  extract,  toilet  water,  cosmetic,  vaseline,  t£'nsprepara~ 
petrolatum,  hair  oil,  pomade,  hair  dressing,  hair  restorative,  hair 
dye,  tooth  wash,  dentifrice,  tooth  paste,   aromatic   cachous,  or 
any  similar  substance  or  article,  by  whatsoever  name  the  same 
heretofore  have  been,  now  are,  or  may  hereafter  be  called,  known, 
or  distinguished,  used,  or  applied  as  perfumes  or  as  cosmetics, 
and  sold  or  removed  for  consumption  and  sale  in  the  United 
States,  where  such  packet,  box,  bottle,  pot,  phial,  or  other  in- 
closure, with  its  contents,  shall  not  exceed  at  the  retail  price      Costing   not 

•         , «  r    i-  •     1  , 1         r   1  more  tnan  five 

or  value  the  sum  of  5  cents,  one-eighth  of  I  cent.  cents. 

Where  such  packet,  box,  bottle,  pot,  phial,  or  other  inclosure,      Costing   not 
with  its  contents,  shall  exceed  the  retail  price  or  value  of  5  cents,  SSL*** 
and  shall  not  exceed  the  retail  price  or  value  of  10  cents,  two- 
eighths  of  I  cent. 

Where  such  packet,  box,  bottle,  pot,  phial,  or  other  inclosure,      Fifteen  cents. 
with  its  contents,  shall  exceed  the  retail  price  or  value  of   10 
cents  and  shall  not  exceed  the  retail  price  or  value  of  15  cents, 
three-eighths  of  1  cent. 

Where  such  packet,  box,  bottle,  pot,  phial,  or  other  inclosure,  Twenty-five 
with  its  contents,  shall  exceed  the  retail  price  or  value  of  15 
cents  and  shall  not  exceed  the  retail  price  or  value  of  25  cents, 
five-eighths  of  1  cent.  And  for  each  additional  25  cents  of 
retail  price  or  value  or  fractional  part  thereof  in  excess  of  25 
cents,  five-eighths  of  1  cent. 

55 


WAR   REVENUE   LAW 

Chewing  gum.  Chewing  gum  or  substitutes  therefor :  For  and  upon  each 
box,  carton,  jar,  or  other  package  containing  chewing  gum  of 
not  more  than  $1  of  actual  retail  value,  4  cents;  if  exceeding 
$1  of  retail  value,  for  each  additional  dollar  or  fractional  part 
thereof,  4  cents;  under  such  regulations  as  the  Commissioner 
of  Internal  Revenue,  with  the  approval  of  the  Secretary  of  the 
Treasury,  may  prescribe. 

Chewing  Gum. 

On  and  after  December  1,  1914,  stamps  must  be  affixed  by  the  maker  or 
manufacturer  to  packages  of  chewing  gum  or  substitutes  therefor  before 
the  same  are  removed  from  the  factory  for  consumption  or  sale. 

Stamps  of  the  denomination  of  4  cents  have  been  provided  for  the  pay- 
ment of  this  tax.  When  packages  exceed  $1  of  retail  value  the  manufacturer 
shall  affix  additional  stamp  or  stamps  to  cover  the  amount  of  tax  due  on 
such  packages. 

There  shall  be  affixed  to  each  and  every  box,  carton,  jar,  or  other  pack- 
age, containing  chewing  gum,  before  its  removal  from  the  factory,  a  label, 
on  which  shall  be  printed  in  plain,  legible  letters,  the  number  of  small  tablets, 
one-cent  packages,  or  other  small  packages  of  chewing  gum  contained  therein, 
and  the  retail  price  of  each  such  tablet  or  small  package  of  gum,  in  form  as 
follows  : 

100  1-cent   packages,    retail   value $1.00 

20  packages,  2  for  5  cents,  retail  price \ 50 

60  packages,  3  for  5  cents,  retail  price 1.00 

12  packages,   5   cents   each 60 

There  shall  also  be  affixed  to  each  package  a  label,  upon  which  shall  be 
printed  in  plain  and  legible  letters  the  manufacturer's  name,  with  town  or 
city  address,  and  the  number  of  district  and  the  State  in  which  the  factory 
is  located,  for  example:  "John  Doe,  Manufacturer,  Philadelphia,  First  Dis- 
trict of  Pennsylvania."  These  labels  may  be  printed  on  the  boxes  or  car- 
tons if  preferred. 

Samples  for  salesmen,  or  for  mailing,  or  for  free  distribution,  shall  be 
taken  only  from  packages  which  have  been  duly  stamped  and  shall  be 
marked  as  provided  elsewhere  in  these  regulations. 

The  stamps  on  emptied  packages  will  be  destroyed. 

When  chewing  gum  and  cachous  are  to  be  sold  through  automatic  vend- 
,  ing  or  selling  machines,  the  same  are  to  be  kept  in  the  regularly  stamped 

boxes,  packages,  or  containers  until  placed  in  the  machines,  when  the  stamps 
shall  be  destroyed.  The  chewing  gum  and  cachous  shall  be  securely  locked 
in  the  machine  and  shall  not  be  removed  therefrom  except  through  the 
regular  aperture  controlled  by  the  mechanism. 

Imported  Articles. 

All  perfumeries,  cosmetics,  chewing  gum,  etc.,  imported  from  foreign 
countries  are  liable  to  the  stamp  tax  as  similar  articles  of  domestic  manu- 
facture, in  addition  to  the  import  duty  on  the  same,  and  the  stamps  must 
be  affixed  by  the  owner  or  importer  before  the  same  are  sold  or  offered  for 
sale,  and  affixed  in  the  same  manner,  upon  every  packet,  box,  bottle,  phial, 
or  other  inclosure  containing  the  same. 

No  exception  is  made  in  this  respect  for  articles  sold  in  original  and 
unbroken  packages  in  which  the  bottles  or  other  inclosures  were  packed  by 
the  manufacturer  before  the  importation.  All  such  must  be  unpacked  for 
the  purpose  of  stamping  the  primary  package.  Importers  may,  however, 
supply  manufacturers  abroad  with  internal-revenue  stamps  to  be  there 
affixed  to  the  respective  articles  before  shipment. 

Collectors  to  Make  Examinations. 

Collectors  and  revenue  agents  will  make  examinations  of  the  retail  drug 
stores,  pharmacies,  and  other  places  in  their  districts  to  ascertain  if  the 

56 


WAR   REVENUE    LAW 

medicinal  articles. and  other  articles  mentioned  in  Schedule  B,  contained  in 
stock  and  offered  for  sale,  are  stamped  according  to  law  wherever  liable 
under  the  foregoing  instructions. 

In  cases  where  the  officer  is  not  able  to  determine  liability  to  tax,  or 
where  there  is  reasonable  doubt,  samples  should  be  sent  to  this  office  marked 
"Law  Division"  for  decision.  Samples  sent  for  this  purpose  should  include 
all  wrappings,  circulars,  advertisements,  etc.,  pertaining  to  the  sampla  in 
question,  and  should  be  accompaned  by  a  letter  of  transmission  giving  full 
information  concerning  the  same. 

W.  H.  OSBORN, 

Commissioner  of  Internal  Revenue. 
Approved. 

BYRON  R.  NEWTON, 

Acting  Secretary  of  the  Treasury. 

(T.  D.  2052.) 

Emergency  revenue  law — Stamp  tax — Chewing  gum. 
The  tax  on  chewing  gum  is  based  on  the  retail  value,  whether  sold  in  small 
packages  or  in  bulk,  on  and  after  December  1,  1914.     The  article  must 
be  retailed   from   stamped  packages,  whether  sold  over  the  counter  or 
by  means  of  a  slot  machine. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  November  5,  1914. 

GENTLEMEN:  Your  letter  dated  the  2d  instant,  in  which  you 
make  several  inquiries  relative  to  the  stamp  tax  imposed  on  chewing 
gum  as  provided  in  the  act  of  October  22,  1914,  has  been  received. 
You  state  that  you  manufacture  your  products  in  several  forms, 
and  generally  sell  in  bulk,  in  all  manner  of  quantities,  and  at  prices 
which  vary  considerably,  such  prices  being  based  largely  on  the 
quantity  sold,  and  that  your  goods  are  retailed  over  the  counter  and 
by  means  of  slot  machines.  Also,  that  one  form  of  gum  produced 
and  put  out  by  you  can  be  soM  by  the  dealer  from  two  to  four  pieces 
for  a  penny.  This  particular  form  of  gum  you  state  is  sold  generally 
in  barrel  lots. 

In  reply,  you  are  informed  that  the  act  of  October  22,  1914,  im- 
poses on  you  as  manufacturer  the  duty  of  stamping  your  product,  on 
and  after  December  1,  1914,  in  whatever  manner  it  may  be  put  up, 
at  the  rate  of  4  cents  for  each  $1  of  its  actual  retail  value.  If  the 
contents  of  a  package  should  exceed  $1  and  be  less  than  $2  in  value, 
it  should  be  stamped  8  cents,  and  similarly  larger  quantities  in  multi- 
ples of  the  initial  tax.  The  law  does  not  provide  for  stamping  chew- 
ing gum  valued  at  retail  at  less  than  $1  at  any  other  rate  than  4  cents. 
Chewing  gum  may  be  sold  at  retail  in  small  packages  either  over 
the  counter  or  by  means  of  a  slot  machine  without  the  same  being 
stamped,  provided  it  is  sold  from  the  original  stamped  packages. 

The  law  requires  the  manufacturer  to  stamp  his  product  on  a 
basis  of  its  actual  retail  value.  You  state  you  can  not  control  this 
price.  Nevertheless,  it  is  believed  that  no  one  is  so  competent  as  the 
manufacturer  to  determine  the  retail  price  or  value  of  his  products, 
and  he  will  be  held  strictly  responsible  for  due  compliance  with  the 
statute.  This  retail  price  or  value  is  a  price  such  as  a  single  package 
or  other  small  quantity  would  be  sold  at  to  consumers  at  the  place  of 
manufacture. 

57 


WAR   REVENUE    LAW 

In  reply  to  your  inquiry  as  to  the  meaning  of  section  21  of  the 
act,  you  are  informed  that  the  provision  that  "every  person,  except 
as  otherwise  provided  in  this  act,  who  offers  or  exposes  for  sale  any 
article  or  thing  provided  for  in  said  Schedule  B  *  *  *  shall  be 
deemed  the  manufacturer  thereof,  and  shall  be  subject  to  all  the 
taxes,  liabilities,  and  penalties,  etc.,"  refers  to  wholesalers  and  re- 
tailers who  may  have  taxable  goods  on  hand  December  1,  when  the 
several  articles  enumerated  in  Schedule  B  must  be  stamped  as  pro- 
vided therein.  On  and  after  December  1,  the  manufacturer  is  re- 
quired to  stamp  his  products  before  delivery  on  a  sale ;  and  such 
goods,  if  in  possession  of  any  other  person,  firm,  or  corporation  on 
said  date,  must  be  stamped  by  such  person,  firm,  or  corporation,  or, 
failing  so  to  do,  they  will  incur  the  liabilities  and  penalties  denounced 
by  the  act. 

Respectfully, 

W.  H.  OSBORN, 

Commissioner  of  Internal  Revenue. 
Messrs. 

Articles  on  That  all  articles  and  preparations  provided  for  in  this  sched- 

hand  Dec.  i,  ^  ^^  are  jn  tjie  hands  of  manufacturers  or  of  wholesale 
or  retail  dealers  on  and  after  December  first,  nineteen  hundred 
and  fourteen,  shall  be  subject  to  the  .payment  of  the  stamp 
taxes  herein  provided  for,  but  it  shall  be  deemed  a  compliance 
with  this  Act  as  to  such  articles  on  hand  in  the  hands  of  whole- 
sale or  retail  dealers  as  aforesaid  who  are  not  the  manufacturers 

May  be  thereof  to  affix  the  proper  adhesive  tax  stamp  at  the  time  the 

retaii.n  packet,  box,  bottle,  pot,  or  phial,  or  other  inclosure  with  its 
contents  is  sold  at  retail. 

Articles  on  Hand,  December  1,  1914. 

Under  this  provision  it  is  held  that  articles  liable  to  tax  in  the  hands  of 
a  retail  dealer  who  is  not  the  manufacturer  thereof,  December  1,  1914,  must 
be  stamped  by  such  retail  dealer  when  he  sells  them  at  retail. 

Articles  liable  to  tax  in  the  hands  of  wholesale  dealers  who  are  not  the 
manufacturers  thereof  on  and  after  December  1,  1914,  may  be  sold  by  such 
wholesale  dealer  to  other  wholesale  dealers  or  to  retail  dealers  without 
stamping  the  same,  the  obligation  to  stamp  being  limited  to  sales  at  retail. 

All  articles  in  the  hands  of  manufacturers  on  said  date  liable  to  tax  must 
be  stamped  before  removal  from  the  place  of  manufacture. 

Retail  Price. 

Dealers,  in  stamping  articles  on  hand  December  1,  1914,  when  sold  at 
retail,  must  adhere  to  the  normal  retail  price  and  stamp  the  article  accord- 
ingly, and  not  according  to  some  "cut  price."  Where  a  price  is  printed  or 
stamped  on  the  article  or  container,  that  will  be  considered  as  the  normal 
retail  price. 

The  manufacturer  or  importer  shall  pay  the  tax  upon  the  normal  retail 
price  or  value  of  the  taxable  articles  under  Schedule  B  manufactured  or 
imported  by  him,  and  affix  the  corresponding  adhesive  stamps  to  the  same 
before  removal  from  the  place  of  manufacture  or  importation.  This  duty 
is  imposed  on  the  manufacturer  or  importer  by  law,  and  he  will  be  held 
strictly  responsible  for  a  due  compliance  with  the  statute. 

This  retail  price  or  value  is  a  price  such  as  a  single  package  or  other 
small  quantity  would  be  normally  sold  at  to  consumers  at  the  place  of  man- 

58 


WAR   REVENUE   LAW 

ufacture  or  importation.  If  the  manufacturer  pays  the  tax  upon  the  retail 
price  in  good  faith  according  to  this  rule,  he  need  apprehend  no  complaint 
if  at  different  times  and  in  different  places  the  article  is  retailed  for  a  greater 
or  less  sum  than  denoted  by  the  stamps  affixed  thereto. 

Five  cents  being  the  lowest  retail  price  mentioned  in  Schedule  fi,  taxable 
articles  retailing  for  a  less  sum  may  be  packed  together  under  one  wrapper, 
band,  or  other  inclosure,  when  the  retail  price  of  said  package  shall  not  in 
the  aggregate  exceed  5  cents,  and  a  stamp  of  the  value  of  one-eighth  of  one 
cent  shall  be  affixed  to  the  outside  band  or  wrapper,  or  other  inclosure,  in 
such  a  manner  that  the  stamp  shall  be  wholly  destroyed  in  opening  it.  In 
such  cases  each  subpackage  shall  have  printed  thereon  the  words :  "Sold 
from  a  duly  stamped  package." 

(T.  D.  2066.) 

Emergency  revenue  law — Talcum  powders,  etc. 

Relative  to  tax  on  tacum  powders,  bay  rum,  witch-hazel,  and  vaseline,  under 
the  act  of  Congress  approved  October  22,  1914. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  November  23,  1914. 

SIR:  Replying  to  your  letter  of  the  19th  instant,  you  are  informed  that 
it  is  held  that  talcum  powders  of  all  kinds,  although  not  specifically  named 
in  Schedule  B  of  the  act  of  Congress  approved  October  22,  1914,  are  clearly 
such  similar  substances  or  articles  to  those  enumerated  therein  as  to  be  sub- 
ject to  the  tax.  Talcum  powder  must,  therefore,  as  a  class,  be  stamped. 

Witch-hazel,    bay    rum,    white    vaseline,    perfumed    vaseline,    and    so-called 
blue-label  vaseline  are  subject  to  the  tax. 
Respectfully, 

W.  H.  OSBORN, 

Commissioner  of  Internal  Revenue. 
Mr. . 

There  shall  be  an  allowance  of  drawback  on  articles  mentioned      Drawbacks  on 
in  Schedule  B  of  this  Act  on  which  any  internal-revenue  tax  |n°  whicl^Ster- 
shall  have  been  paid,  equal  in  amount  to  the  stamp  tax  paid   ,psalpafdvenue  tax 
thereon,  and  no  more  when  exported,  to  be  paid  by  the  warrant 
of    the    Secretary    of    the    Treasury    on    the    Treasurer,  of    the 
United  States,   out  of  any   money   arising  from  internal   taxes 
not  otherwise  appropriated : 

Provided,  That  no  allowance  of  drawback  shall  be  made  for  any      NO  allowance 
such  articles  exported  prior  to  the  date  this  Act  becomes  effec-   ber°ri, 
tive.     The  evidence  that  any  such  tax  has  been  paid  as  afore- 
said shall  be  furnished  to  the  satisfaction  of  the  Commissioner 
of  Internal  Revenue  by  the  person  claiming  the  allowance  of 
drawback,    and    the    amount   shall    be    ascertained    under    such 
regulations  as  shall  be  prescribed  from  time  to  time  by   said 
commissioner  with  the  approval  of  the  Secretary  of  the  Treas- 
ury. 

REGULATIONS. 

These  include  all  perfumeries,  eau  de  cologne,  and  all  other  scented 
waters ;  pastilles  and  all  scented  powders,  papers,  medallions,  aromatic 
cachous,  or  other  materials  used  to  impart  their  odor  to  the  breath,  the  air, 
or  other  substances ;  all  cosmetics,  lotions,  and  powders  for  beautifying, 
restoring,  improving,  or  preserving  the  skin,  hair,  mouth,  teeth,  nails,  or 
other  parts  of  the  body. 

Articles  under  the  head  of  perfumes  and  cosmetics  are  taxable  under 

59 


WAR   REVENUE   LAW 

the  statute,  regardless  of  the  style  or  manner  in  which  they  are  put  up  and 
sold.  It  is  immaterial  how  they  are  labeled,  recommended,  or  advertised, 
or  whether  they  are  labeled  at  all,  so  long  as  they  are  known  to  come  within 
the  provisions  of  the  law. 

Bulk  Packages. 

Articles  subject  to  stamp  tax  under  Schedule  B  are  equally  liable  to 
stamp  tax  when  sold  in  what  are  termed  bulk  packages  as  when  sold  in 
retail  packages,  and  the  value  of  the  stamp  or  stamps  to  be  affixed  must 
correspond  with  and  be  proportionate  to  the  price  of  a  single  retail  package. 

Dealers  may  retail  directly  to  the  consumer  from  such  bulk  packages  as 
have  been  properly  stamped  by  the  manufacturer  or  importer,  drawing  from 
the  same  in  quantities  to  suit  their  customers  without  any  additional  stamp- 
ing, but  the  stamps  attached  to  such  bulk  packages  will  only  protect  the 
original  contents. 

If  bulk  packages  are  broken  up  by  the  dealer  drawing  off  the  contents 
into  smaller  vessels  to  be  put  upon  his  shelves,  or  otherwise  kept  for  future 
sales,  the  contents  so  drawn  off  thereby  ceases  to  be  identified  with  the 
stamped  package  in  which  they  were  originally  put  up  by  the  manufacturer 
or  sold  by  the  importer,  and  such  contents  so  put  up  become  liable  to  seizure 
if  stamps  are  not  affixed  to  them. 

The  contents  of  bulk  packages,  liable  to  tax  under  Schedule  B,  which 
were  in  the  hands  of  retailers  on  the  1st  day  of  December,  1914,  and  there- 
fore unstamped,  must  be  stamped  when  sold  at  retail  from  said  packages 
proportionately  to  the  retail  price  of  the  whole  package. 

Unclarified  Petrolatum  and  Other  Incomplete  Manufactures 

Shipped  in  Bulk. 

While  the  act  specifically  provides  that  the  stamp  taxes  shall  apply  to 
petrolatum,  it  is  held  to  be  the  intent  of  the  statute  to  impose  the  tax  mainly 
upon  the  clarified  product.  The  unclarified  is  an  unfinished  product  requir- 
ing to  be  treated  with  heat  and  otherwise  manipulated  before  it  will  be 
accepted  by  manufacturing  druggists  as  a  basis  for  various  ointments,  or 
drawn  off  into  small  packages  and  sold  as  vaseline,  and  may  be  shipped  in 
bulk  without  stamps. 

If,  however,  the  unclarified,  unfinished  petrolatum  is  sold  for  use  by 
consumers,  either  at  wholesale  or  retail,  it  is  liable  to  the  stamp  tax  at  the 
same  rate  as  the  finished  product: 

Many  articles  which  ultimately  become  taxable  are  not  so  when  they 
are  first  removed  from  the  manufacturing  chemist's  laboratory,  but  are  in- 
complete manufactures,  the  process  of  manufacture  not  being  completed 
until  they  are  bottled,  labeled,  or  otherwise  placed  in  a  salable  condition. 

This  regulation  particularly  applies  to  articles  manufactured  for  dealers, 
to  be  bottled,  packed,  and  labeled  by  them,  and  sold  under  their  own  names, 
when  it  becomes  the  duty  of  the  dealers  who  pack  and  sell  the  goods  under 
their  own  names  and  not  the  manufacturers,  to  affix  the  tax  stamps  due. 

Soaps. 

Soaps  are  ordinarily  either  laundry  or  toilet  articles.  They  may,  how- 
ever, and  do  become  cosmetic  articles,  whenever  the  manufacturer  or  vendor 
holds  them  out  and  recommends  them  to  the  public  for  the  softening  and 
beautifying  effects  produced  by  their  use  upon  the  hair,  mouth,  skin,  or  com- 
plexion. In  other  words,  whenever  the  manufacturer  or  vendor  takes  them 
out  of  the  category  of  laundry  or  toilet  articles  and  places  them  in  the' 
category  of  cosmetic  articles,  he  must  stamp  them  according  to  the  pro- 
visions of  Schedule  B. 

Samples. 

Samples  of  perfumery  and  cosmetics,  taxable  under  Schedule  B,  may  be 
removed  from  the  place  of  manufacture  for  free  distribution,  without 
stamps  or  payment  of  tax. 

60 


WAR   REVENUE   LAW 

Every  sample  so  removed,  however,  must  have  legibly  printed  thereon 
the  following  notice: 

"This  is  a  free  sample  removed  from  the  factory  for  gratuitous  distri- 
bution. Any  person  selling  or  exposing  for  sale  this  sample,  unstamped,  at 
any  time  will  be  liable  to  all  the  pains  and  penalties  of  the  law  denounced 
against  persons  selling,  or  exposing  for  sale,  unstamped  articles  taxable  under 
Schedule  B." 

But  where,  owing  to  the  minute  size  of  the  sample,  the  above  prescribed 
cautionary  notice  can  not  be  legibly  and  neatly  printed  and  affixed  thereto, 
the  following  may  be  substituted :  ^ 

"Free  sample.     Penalty  for  safe,  $500." 

Where  several  small  free  samples  are  packed  together  in  a  box,  the 
whole  being  given  as  an  entirety,  it  will  be  sufficient  if  the  free  sample  label 
is  placed  upon  the  box. 

Manufacturer's  Statements. 

At  the  end  of  each  and  every  month,  the  manufacturer  or  maker  or 
packer  for  distribution  of  any  of  the  articles  or  commodities  provided  for  in 
Schedule  B  must  make  a  declaration  as  provided  in-  section  20  of  the  act  as 
follows  : 

"That  every  manufacturer  or  maker  of  any  of  the  articles  or  commodi- 
ties provided  for  in  Schedule  B,  or  his  foreman,  agent,  or  superintendent 
shall  at  the  end  of  each  and  every  month  make,  sign,  and  file  with  the  col- 
lector of  internal  revenue  for  the  district  in  which  he  resides  a  declaration 
in  writing  that  no  such  article  or  commodity  has,  during  such  preceding 
month  or  time  when  the  last  declaration  was  made,  been  removed  or  car- 
ried, or  sent,  or  caused  or  suffered  or  known  to  have  been  removed,  carried, 
or  sent  from  the  premises  of  such  manufacturer  or  maker  other  than  such  as 
have  been  duly  taken  account  of  and  charged  with  the  stamp  tax,  on  pain  of 
such  manufacturer  or  maker  forfeiting  for  every  refusal  or  neglect  to  make 
such  declaration  $100 ;  and  if  any  such  manufacturer  or  maker,  or  his  fore- 
man, agent  or  superintendent,  shall  make  any  false  or  untrue  declaration, 
such  manufacturer,  or  maker,  or  foreman,  agent,  or  superintendent  making 
the  same  shall  be  deemed  guilty  of  a  misdemeanor,  and  upon  conviction  shall 
pay  a  fine  of  not  more  than  $500,  or  be  imprisoned  not  more  than  six  months, 
or  both,  at  the  discretion  of  the  court." 

Articles  Exported  Without  Stamping  and  Drawback  on 
Stamped  Articles  Exported. 

Articles  liable  to  tax  under  Schedule  B,  when  intended  for  exportation, 
may  be  manufactured  and  sold  or  removed  without  having  the  stamps 
affixed  thereto  and  without  being  charged  with  tax  as  aforesaid,  by  giving 
bond  and  complying  with  regulations  tq  be  provided  by  the  Commissioner  of 
Internal  Revenue  and  approved  by  the  Secretary  of  the  Treasury.  See  sec- 
tion 19,  act  of  October  22,  1914.  An  allowance  of  drawback  on  articles  men- 
tioned in  Schedule  B,  which  have  already  been  stamped  and  afterwards  ex- 
ported, is  allowed  by  the  last  paragraph  of  Schedule  B. 

SEC.  23.  That  all  administrative,  special,  or  stamp  provisions  of  ke?teca°sr<ieciuire! 
law,  including  the  law  relating  to  the  assessment  of  taxes,   so   by  regulation, 
far  as  applicable,  are  hereby  extended  to  and  made  a  part  of 
this  Act,  and  every  person,  firm,  company,  corporation,  or  asso- 
ciation liable  to  any  tax  imposed  by  this  Act,  or  for  the  collec- 
tion thereof,   shall   keep  such  records  and  render,   under  oath, 
such  statements  and  returns,  and  shall  comply  with  such  regu- 
lations as  the  Commissioner  of  Internal  Revenue,  with  the  ap- 
proval of  the  Secretary  of  the  Treasury,  may  from  time  to  time 
prescribe,  and  every  such  person,  firm,   company,  corporation, 

61 


WAR   REVENUE   LAW 

or   association   who   evades   or   attempts   to   evade   any   of   the 
Penalty.  taxes  imposed  by  this  Act,  or  shall   fail   to  truly   account   for 

and  pay  all  taxes  collected  by  them  under  this  Act,  or  any 
regulations  issued  thereunder,  shall  be  subject  to  a  penalty  of 
double  the  amount  of  the  taxes  evaded  or  attempted  to  be 
evaded  or  unlawfully  withheld,  to  be  assessed  and  collected  as 
other  penalties  incurred  under  internal-revenue  laws  are  as- 
sessed and  collected ;  and  for  the  expense  connected  with  the 
assessment  and  collection  of  the  taxes  provided  by  this  Act 
Appropriation,  there  is  hereby  appropriated  $200,000,  or  so  much  thereof  as  may 
be  required,  out  of  any  money  in  the  Treasury  not  otherwise  ap- 
propriated; $170,000  to  be  added  to  and  made  a  part  of  the 
appropriations  for  "salaries  and  expenses  of  collections  of  in- 
ternal-revenue, nineteen  hundred  and  fifteen;  and  $30,000  to  the 
appropriation  for  paper  for  internal-revenue  stamps,  nineteen 
hundred  and  fifteen." 

The  fact  that  a  fermented  or  distilled  liquor  tax  has  already  been 
paid  does  not  exempt  it  from  this  section.  United  States  v.  J.  D.  Her 
Brewing  Co.,  121  Fed.,  41. 

iitn1tCatieonpirDe-by       SEC*  24'  That  the  provisions  of  this  Act  shall  take  effect  on  the 
cember  si,  1915.   day  next  succeeding  the  date  of  its  passage,  except  where  other- 
wise expressly  provided: 

Provided,  That  on  the  day  after  the  thirty-first  day  of  December, 
nineteen  hundred  and  fifteen,  the  taxes  levied  under  this  Act 
shall  no  longer  be  levied  and  collected,  but  all  taxes  arising  or 
accruing  before  said  date  shall  continue  to  be  collectible  under 
the  terms  of  this  Act: 

Provided,  however,  That  on  and  after  the  first  day  of  January, 
nineteen  hundred  and  sixteen,  the  provisions  of  section  thirty- 
three  hundred  and  thirty-nine  of  the  Revised  Statutes,  as 
amended  by  an  Act  approved  April  twelfth,  nineteen  hundred 
and  two,  imposing  a  tax  on  fermented  liquors  shall  not  be  af- 
fected by  any  limitation  as  to  the  levying  or  collecting  of  the 
additional  tax  imposed  by  this  Act  on  such  fermented  liquors, 
but  shall  then  be  in  full  force  and  effect  on  and  after  the  said 
first  day  of  January,  nineteen  hundred  and  sixteen.  All  stamps 
provided  for  in  this  Act  unused  after  the  aforesaid  date  shall 
be  redeemed  from  the  holder  thereof,  under  such  rules  as  the 
Secretary -of  the  Treasury  may  prescribe. 


62 


Treasury  Decisions 


(T.  D.  2036.) 

Consignment  of  newspapers  under  Schedule  A,  act  of  October  22, 

1914. 

Reports  of  shipments  of  newspapers  to  be  made  monthly  to  collectors  in  lieu 

of  bills  of  lading 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  October  28,  1914. 

SIR:  This  office  is  in  receipt  of  your  letter  of  the  23d  instant, 
relative  to  that  portion  of  the  internal-revenue  act  of  October  22, 
1914,  relating  to  the  consignment  of  newspapers. 

In  reply,  you  are  informed  that  in  lieu  of  a  bill  of  lading,  the 
publisher  of  the  newspaper  must  file  on  or  before  the  15th  day  of 
each  month  with  the  collector  of  the  district  a  report,  under  oath, 
showing  the  number  of  shipments  during  the  preceding  month,  to 
which  report  a  stamp  shall  be  affixed  equal  in  value  to  one  cent  for 
each  shipment  so  reported.  The  portion  of  the  act  relating  to  this 
subject  goes  into  effect  December  1.  The  first  report  to  be  made, 
therefore,  will  be  on  or  before  January  15,  1915,  for  the  number  of 
bundles  shipped  during  the  month  of  December.  *  *  * 
Respectfully, 

W.  H.  OSBORN, 

Commissioner  of  Internal  Revenue. 
Mr. 


(T.  D.  2037.) 

Supplemental  instructions  relative   to  paying  taxes  imposed   upon 
wines  by  the  act  of  October  22,  1914. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  October  30,  1914. 
To  collectors  of  internal  revenue: 

In  office  telegram  of  October  23,  1914,  collectors  were  in- 
structed to  require  dealers  who  sell  wine  to  consumers  to  keep  ac- 
count of  sales  on  and  after  that  date  and  to  delay  collection  of  tax 
until  further  advised. 

T.  D.  2027  of  October  24  prescribes  method  of  procedure  and 
form  of  report. 

Collectors  should  collect  no  tax  on  wines  sold  by  dealers  on 
and  after  October  23  until  they  receive  from  this  office  the 
special  wine  stamps  which  they  will  require  all  dealers  in  wines  who 
sell  to  consumers  to  purchase  in  quantities  sufficient  for  their  needs. 

63 


WAR   REVENUE   LAW 

So  many  of  these  stamps  as  will  be  necessary  to  represent  the  tax 
on  wines  sold  up  to  the  date  of  making  the  report  required  in  T.  D. 
2027  will  be  canceled  by  each  dealer  and  disposed  of  in  the  manner 
provided  in  said  Treasury  decision. 

fhe  special  wine  stamps  that  will  be  forwarded  to  collectors 
about  the  15th  proximo  must  be  used  exclusively  to  indicate  the  pay- 
ment of  the  wine  tax,  and  under  no  circumstances  shall  documentary 
or  proprietary  stamps  be  used  to  indicate  the  payment  of  tax  on 
sale  of  wines  or  cordials,  and  it  must  be  borne  in  mind  by  every 
collector  that  no  discount  can  be  allowed  on  the  sale  of  wine  stamps. 

Collectors  may  allow  a  discount  of  1  per  cent  on  the  sale  of  ad- 
hesive stamps  used  in  the  payment  of  the  tax  levied  in  Schedules  A 
and  B  of  the  act  in  quantities  of  not  less  than  $100  face  value  cov- 
ered in  one  sale,  except  to  officers  and  employees  of  the  Internal 
Revenue  Service. 

ROBT.  WILLIAMS,  JR., 
Acting  Commissioner  of  Internal  Revenue. 


(T.  D.  2038.)     , 

Emergency  revenue  law. 
Taxes  imposed  under  Schedule  B  effective  on  and  after  December  1,  1914 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  November  3,  1914. 
To  collectors  of  internal  revenue: 

Referring  to  the  discrepancy  in  the  act  of  October  22,  1914,  as 
to  the  date  when  Schedule  B  goes  into  effect,  the  act  providing  in 
section  21  that  the  said  schedule  shall  go  into  effect  30  days  after 
the  passage  of  the  act  and  in  the  schedule  itself  that  it  shall  go  into 
effect  December  1,  you  are  advised  that  as  originally  drafted  the  act 
provided  in  both  places  that  Schedule  B  was  to  go  into  effect  30 
days  after  passage.  This  was  later  amended  by  paragraph  6  of 
Schedule  B  to  December  1,  1914,  and  it  is  therefore  held  by  this 
office  that  the  schedule  in  question  is  effective  on  and  after  Decem- 
ber 1,  1914. 

GEO.  E.  FLETCHER, 
Acting  Commissioner  of  Internal  Revenue. 


(T.  D.  2049.) 

Emergency  revenue  law — Income-tax  certificates. 

Income-tax  certificates  which  are  not  required  by  specific  statute,  but  by 
regulations  only,  are  not  subject  to  tax  as  "certificates  required  by  law" 
under  act  of  October  22,  1914. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  November  12,  1914. 

SIR:  In  reply  to  your  verbal  inquiry  as  to  whether  certificates 

64 


TREASURY   DIVISIONS 

of  ownership,  certificates,  of  exemption,  and  other  certificates  re- 
quired by  the  income-tax  regulations,  but  not  by  specific  statute,  are 
subject  to  tax  as  certificates  required  under  the  internal-revenue  act 
of  October  22,  1914,  I  beg  to  advise  you  that  they  are  not. 

While  regulations  made  pursuant  to  and  under  authority  of  law 
as  a  rule  have  the  force  and  effect  of  law,  it  is  held  by  this  office  that 
it  was  not  the  intent  of  Congress  to  tax  certificates  which  are  re- 
quired by  regulations  of  the  department  for  its  own  purposes  and 
not  by  any  express  provision  of  law. 

Respectfully,  W.  H.  OSBORN, 

Commissioner  of  Internal  Revenue. 
Mr. 


(T.  D.  2050.) 

Emergency  revenue  law. 
Relative  to  classification  of  liqueurs,  cordials,  and  similar  compounds. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  November  13,  1914. 

SIR  :  Replying  to  your  letter  of  the  7th  instant,  you  are  in- 
formed that  the  words  "liqueurs,  cordials,  and  similar  compounds," 
as  used  in  the  act  of  Congress  approved  October  22,  1914,  are  not 
held  to  include  alcohol,  whiskies,  rums,  brandies,  and  gins,  except 
when  so  compounded  as  to  be  known  to  the  trade  as  cordials  and 
liqueurs.  Compounds  classed  by  this  office  as  medicines  are  also 
excepted.  The  word  "liqueur,"  as  defined  by  Webster,  is  an  alco- 
holic aromatic  cordial,  and  obviously  a  cordial  is  practically  the 
same.  It  would  appear,  therefore,  that  the  words  "liqueurs,  cor- 
dials, or  similar  compounds,"  under  whatever  name  sold  or  offered 
for  sale,  would  include  those  beverages  commonly  known  to  the 
trade  as  liqueurs  and  cordials.  Further,  the  term  "similar  com- 
pounds" would  appear  to  include  vermuths  and  like  wine  com- 
pounds, bitters  used  as  beverages,  cocktails,  maraschino,  cordialized 
liquors,  fortified  fruit  juices,  and  all  other  compounds  the  formulas 
of  which,  methods  of  preparation,  or  use,  make  them  sufficiently  like 
liqueurs  and  cordials  to  place  them  in  the  class  with  liqueurs  and 
cordials. 

Respectfully, 

G.  E.  FLETCHER, 

Acting  Commissioner  of  Internal  Revenue. 
Mr. 


(T.  D.  2053.) 

Emergency  revenue  law — Wines,  etc. 

Relative  to  affixing  and  canceling  stamps  on  containers   of   wines,   cordials, 
liqueurs,   and  similar  compounds. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  November  jj,  1914. 

SIR  :  Replying  to  your  letter  of  the  9th  instant,  you  are  informed 

65 


WAR   REVENUE   LAW 

that  the  act  of  Congress  approved  October  22,  1914,  imposing  taxes 
upon  wines,  liqueurs,  and  cordials,  is  silent  as  to  where  such  stamps 
must  be  affixed  to  the  bottles  or  other  containers.  It  is  held,  there- 
fore, that  these  stamps  must  be  affixed  conspicuously  to  the  bottles 
or  other  actual  containers  of  the  wines  and  cordials  and  must  be 
canceled  by  the  person  affixmg  same,  and  that  the  initials  of  the 
person,  as  well  as  the  date  when  affixed,  must  be  written  or  stamped 
indelibly  upon  the  adhesive  stamp.  When  the  bottle  or  other  con- 
tainer to  which  the  stamp  is  affixed  is  empty,  the  person  emptying 
same  must  completely  efface  and  obliterate  the  adhesive  stamp  or 
stamps,  as  the  case  may  be. 

In  reply  to  your  second  inquiry,  this  office  is  unable  to  state  how 
bottles  or  other  containers  from  which  sales  are  made  may  be  kept 
constantly  filled  and  at  the  same  time  be  stamped  and  the  stamps  be 
duly  canceled  in  conformity  with  the  law.  Bottles  from  which  wines 
and  cordials  are  sold  to  consumers  for  immediate  consumption  must 
be  stamped  with  properly  canceled  stamps,  and  when  empty  the 
stamps  should  be,  as  above  stated,  completely  effaced  and  obliter- 
ated and  new  ones  substituted  therefor  upon  each  refilling.  It  would 
seem,  therefore,  to  be  necessary  to  completely  empty  the  bottles  in 
order  to  comply  with  the  law. 

Respectfully, 

ROBT.  WILLIAMS,  JRV 

Acting  Commissioner  of  Internal  Revenue. 
Mr. . 


(T.  D.  2054.) 

Emergency  revenue  lazv  —  Certificates  of  deposits. 

Certificates  of  deposit  issued  by  banks  not  taxable  under  the  act  of  October 

22,   1914. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 


Washington,  D.  C.,  November  14, 
SIR:  In  reply  to  your  letter  of  the  9th  instant,  you  are  informed 
that  under  the  internal-revenue  act  of  October  22,  1914,  stamps  are 
not  required  to  be  affixed  to  certificates  of  deposits  issued  by  banks. 
Respectfully, 

ROBT.  WILLIAMS,  JR., 
Acting  Commissioner  of  Internal  Revenue. 
Mr.  ---  . 


(T.  D.  2055.) 

Emergency  revenue  law — Discount  on  purchases  of  documentary 

stamps. 

Postmasters  and  others  authorized  to  be   furnished   stamps  without  prepay- 

66 


TREASURY   DIVISIONS 

ment  not  allowed   discount  unless   stamps  are  paid   for  by  them  at  the 
time. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 


Washington,  D.  C.,  November  16, 
To  collectors  of  internal  revenue: 

You  are  informed  that  postmasters  who  buy  from  you  and  pay 
for  the  stamps  issued  under  the  internal-revenue  act  of  October  22, 
1914,  are  allowed  a  discount  of  1  per  cent  on  purchases  amounting 
to  $100  or  more.  If  they  are  furnished  with  the  stamps  under  bond 
without  prepayment  therefor  they  are  not  allowed  the  1  per  cent 
discount. 

ROBT.  WILLIAMS,  JR., 
Acting  Commissioner  of  Internal  Revenue. 


(T.  D.  2056.) 

Emergency  revenue  law — Poivcr  of  attorney  to  transfer  stock. 
An    instrument    appointing   an    attorney    in    fact    to    transfer    stock    on    the 
books  of  the  company  requires  it  to  be  stamped  as  a  power  of  attorney, 
but   an    instrument    authorizing   the    secretary   to    make    the   transfer    is 
held  not  to  be  a  power  of  attorney. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  November  14,  1914. 

SIR:  This  office  is  in  receipt  of  your  letter  of  the  9th  instant, 
asking  for  a  ruling  under  Schedule  A  of  the  act  of  October  22,  1914. 
You  make  the  following  inquiry : 

1.  Does  the  tax  of  25  cents  imposed  in  Schedule  A  on  powers  of  at- 
torney to  sell  or  transfer  stock  apply  to  the  ordinary  formal  power  of  at- 
torney to  transfer  on  the  books?  In  other  words,  is  the  sale  and  the 
transfer  of  the  stock  itself  taxed  separately? 

If  this  so-called  power  of  attorney  on  the  back  of  the  certificate 
simply  authorizes  the  secretary  of  the  company  to  transfer  the  same 
on  the  books  of  the  company,  it  is  held  not  to  be  a  power  of  attor- 
ney within  the  meaning  of  the  internal-revenue  law.  In  that  case  the 
secretary  of  the  corporation  can  not  be  said  to  be  the  agent  or 
attorney  for  the  transfer  of  stock,  as  the  effect  of  the  instrument  is 
only  to  give  the  secretary  authority  to  do  an  act  which  he  is  re- 
quired to  do  by  the  by-laws  of  the  organization  when  properly  au- 
thorized, just  as  a  cashier  of  a  bank  is  required  to  pay  a  check  when 
the  check  is  properly  signed  and  presented  for  payment.  In  that 
case,  therefore,  this  instrument  would  only  be  taxable  as  a  transfer 
of  stock.  An  instrument  appointing  an  attorney  in  fact  to  transfer 
stock  on  the  books  of  the  company  will  require  stamp  as  a  power 
of  attorney. 

Respectfully, 

ROBT.  WILLIAMS,  JR., 
Acting  Commissioner  of  Internal  Revenue. 

Mr. . 

67 


WAR   REVENUE   LAW 

(T.  D.  2057.) 

Annual  inventories. 

Annual   inventories   to   be  made   by   cigar   and   tobacco   manufacturers   and 
verified  by  collectors  and  their  deputies. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  November  if,  1914. 
To  collectors  of  internal  revenue: 

Every  manufacturer  of  tobacco  or  snuff  and  every  manufac- 
turer of  cigars  or  cigarettes  shall  make  a  true  inventory  of  the  stock 
of  tobacco  materials,  stamped  and  unstamped  manufactured  tobacco 
and  snuff,  or  cigars  and  cigarettes,  and  attached  and  unattached  in- 
ternal-revenue stamps  on  hand  in  the  factory  on  the  1st  day  of  Jan- 
uary of  each  year,  and  shall  verify  the  same  by  his  own  oath,  as 
provided  in  sections  3358  and  3390  of  the  Revised  Statutes,  respect- 
ively. These  statutes  also  require  that  the  collector  (or  his  deputy) 
shall  make  personal  examination  of  the  stock  sufficient  to  satisfy 
himself  as  to  the  correctness  of  the  inventory,  and  shall  verify  the 
fact  of  such  examination  by  oath  to  be  indorsed  on  the  inventory. 

These  inventories  are  important  elements  in  settlement  of  manu- 
facturers' accounts  for  the  year  or  period.  It  is  absolutely  essential 
that  the  accuracy  of  an  inventory  shall  not  be  questioned  by  a  manu- 
facturer when  his  accounts  show  deficiencies  and  he  is,  in  conse- 
quence, called  upon  to  show  cause  against  assessment  for  omitted 
tax.  Each  manufacturer  shall  see  to  it  tJiat  a  proper  inventory  of 
his  factory  is  made,  for  the  reason  that  such  inventory  having  been 
sworn  to  by  the  manufacturer  and  verified  under  oath  by  a  deputy 
collector,  no  claim  of  failure  to  include  certain  tobacco,  ,made  in 
response  to  a  deficiency  notice,  will  be  entertained.  Therefore  the 
following  instructions  in  regard  to  making  the  required  inventory 
must  be  observed : 

(a)  All  tobacco  material  within  the  metes  and  bounds  of  the 
bonded  factory  premises,  as  described  on  Form  41 J^  posted  in  cigar 
factory  and  on  Form  36  of  tobacco  factory  shall  be  segregated  into 
classes  corresponding  strictly  with  the  headings  provided  therefor 
in  Form  70a  and  Form  70b. 

(b)  Each  class  of  tobacco  shall  be  weighed  separately. 

(c)  Tobacco  dust,  sif tings,  sweepings,  and  waste  which  has  ac- 
cumulated in  manufacturing  shall  not  be  included  under  any  class  of 
tobacco  except  under  the  head  of  "Waste,"  which  is  provided  for  in 
inventory  Form  70b.     The  quantity  of  each  of  these  by-products 
may  there  be  shown  separately. 

(d)  Inventory  must  include  all  unstemmed  leaf  tobacco  debited 
on  manufacturers'  books  and  returns  which  is  stored  off  the  bonded 
factory  premises   for  which   outside   storage  permission   has  been 
granted. 

(e)  To  enable  the  deputy  collector  to  verify  the  inventory,  a 
list  should  be  made  of  each  unopened  hogshead,  case,  or  bale,  or 
other  package  of  tobacco,  with  sufficient  description  for  identifica- 
tion by  the  deputy,  of  all  broken  packages  or  loose  tobacco  within 

68 


TREASURY   DIVISIONS 

the  factory,  and  of  all  unstemmed  tobacco  stored  off  the  bonded 
premises,  shall  be  made  on  the  back  of  the  inventory  form  or  pre- 
served on  separate  sheets  of  the  same  size  and  attached  thereto. 

(/)  An  accurate  record  should  also  be  kept  of  the  quantity  of 
each  class  of  tobacco  (as  inventoried)  used  in  production  between 
the  time  inventory  is  taken  and  the  time  the  deputy  calls  to  verify 
the  same. 

Collectors  will  instruct  their  deputies  so  to  arrange  their  routes 
as  to  make  these  verifications  at  the  earliest  practicable  date  after 
January  1  next.  In  verifying  an  inventory  each  deputy  collector — 

1.  Will  see  that  each  class  of  tobacco  has  been  properly  inven- 
toried and  instructions  above  observed. 

2.  Will  determine  from  the  quantities  of  each  different  kind  of 
tobacco  purchased,  sold,  and  used  between  the  date  inventory  was 
taken  and  the  time  of  his  verification  as  to  the  correctness  of  the 
inventory,  and  will  require  any  necessary  amendments  before  the 
manufacturer  makes  oath  to  same  before  him. 

"Deficiencies  found  by  examining  officers"  should  be  immedi- 
ately reported  to  the  collector,  and  shall  be  treated  in  accordance 
with  the  instructions  under  that  head  on  page  60  of  Regulations  No. 
8,  revised  July  1,  1910. 

Upon  receipt  of  these  inventories,  properly  verified,  collectors 
will  prepare  their  abstracts  on  loose  leaves  Record  11  and  Form  146 
of  the  accounts  of  cigar  and  tobacco  manufacturers  in  their  districts 
for  the  year  or  period  ending  December  31,  1914,  observing  in  such 
preparation  instructions  in  T.  D.  1726  and  T-Mim-980,  as  modified 
by  T-Mim-1006,  and  Treasury  Decision  No.  1479  and  T-Mim-993, 
respectively,  and  will  forward  said  accounts  to  this  office  as  fast  as 
they  are  completed,  not  later  than  90  days  from  the  1st  day  of  Jan- 
uary, 1915.  An  account  showing  a  deficiency  should  not  be  held 
until  the  tax  on  same  is  collected,  but  forwarded  at  once,  after  hav- 
ing made  sure  it  is  correctly  stated.  Formal  notice  to  show  cause 
will  then  be  forwarded  for  service  on  the  manufacturer. 

Collectors  are  hereby  instructed  to  cause  a  copy  of  this  circular, 
together  with  the  necessary  inventory  blank,  to  be  delivered  to  each 
manufacturer  of  tobacco,  snuff,  cigars,  or  cigarettes  registered  within 
their  respective  districts,  not  later  than  the  15th  day  of  December 
next,  for  the  taking  of  the  required  inventories  on  January  1,  1915. 

ROBT.  WILLIAMS,  JR., 
Acting  Commissioner  of  Internal  Revenue. 


Income  Tax 


CHAPTER  II 

RETURNS  FOR  THE  YEAR,  1914. 

Statement  by  Secretary  McAdoo: 

The  following  table  shows  the  total  number  of  income  tax  re- 
turns filed  during  the  fiscal  year,  1914,  classified  according  to  the 
amount  of  net  income  shown  on  the  returns:  These  returns  for 
the  first  year  of  the  operation  of  the  new  income  tax  law  cover 
income  for  the  ten  months  from  March  1  to  December  31,  1913: 


CLASSIFICATION. 

No  RETURNS. 

$       2,500.00  to 

$       3,333.00 

79,426 

3,333.33  to 

5,000.00 

114,484 

5,000.00  to 

10,000.00 

101,718 

10,000.00  to 

15,000.00 

26,818 

15,000.00  to 

20,000.00 

11,977 

20,000.00  to 

25,000.00 

6,817 

25,000.00  to 

30,000.00 

4,164 

30,000.00  to 

40,000.00 

4,553 

40,000.00  to 

50,000.00 

2,427 

50,000.00  to 

75,000.00 

2,618 

•   75,000.00  to 

100,000.00 

998 

100,000.00  to 

150,000.00 

785 

150,000.00  to 

200,000.00 

311 

200,000.00  to 

250,000.00 

145 

250,000.00  to 

300,000.00 

94 

300,000.00  to 

400,000.00 

84 

400,000.00  to 

500,000.00 

44 

500,000.00  to 

1,000,000.00 

91 

1,000,000.00  to 

and  over 

44 

Total  

..357,598 

Married    

278,835 

Single 

Men  

55,212 

Women.  . 

23.551     357.598 

Married    women    rendering    separate    returns    in- 
cluded above   . 


6,682 


INCOME  TAX 

DEPRECIATION  SCHEDULE. 

The  following  percentages  have  been  adopted  as  a  guide  by  the 
Chicago  Real  Estate  Board  -for  the  computation  of  depreciation  of 
buildings  in  the  absence  of  a  Treasury  Department  ruling  on  the 
subject.  Each  building  must  be  considered  in  its  individual  detail, 
reasonable  depreciation  is  deducted: 

Fire-proof  Steel  Buildings — Reinforced  Concrete  Buildings. 

Depreciation  One  (1%)  Per  Cent,  on  buildings  five  years  old  or 
less;  Two  (2%)  Per  Cent,  on  buildings  more  than  five  years  old. 
Mill  Constructed  Buildings  and  Fire-proof  Apartment  Buildings. 

Depreciation  Two  (2%)    Per  Cent,  on  buildings  five  years  old 
or  less;  Three  (3%)  Per  Cent,  on  buildings  more  than  five  years 
old. 
Brick  and  Lath  Buildings,  Including  Ordinary  Flat  Buildings. 

Depreciation  Three  (3%)  Per  Cent,  to  Four  (4%)  Per  Cent. 

Old  Frame  and  Nearly  Obsolete  Buildings. 

Depreciation  Five  (5%)  Per  Cent,  and  upward. 

Note. — Where  the  value  of  the  power  plant  and  machinery,  in- 
cluding elevators,  can  be  separated  from  the  total  value  of  the 
building,  compute  depreciation  at  Ten  (10%)  Per  Cent,  on  it;  the 
remainder  being  figured  at  the  percentages  heretofore  named. 

The  estimated  value  of  buildings,  power  plants,  etc.,  as  of  March 
1,  1915,  to  be  taken  as  a  basis  on  which  deductions  are  to  be  made. 


72 


TREASURY  DECISIONS,  1914 

(T.  D.  1942.) 

Income  tax  ruling  as  to  income  derived   from  bonds  containing  "tax-free  • 
covenant  clause,"  and  how  same  may  be  returned  on  Form  1040  when. 
exemption  is  not  claimed  at  the  source. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  February  3,  1914. 
To  collectors  of  internal  revenue: 

This  office  is  in  receipt  of  numerous  letters  asking  whether  in- 
come paid  at  the  source,  although  not  withheld  at  the  source,  can  be 
placed  in  column  A,  page  2,  of  Form  1040,  and  in  reply  to  this 
inquiry  you  will  advise  as  follows : 

The  stipulation  in  bonds  whereby  the  tax  which  may  be  assessed 
against  them  or  the  income  therefrom  is  guaranteed  is  a  contract 
wholly  between  the  corporation  and  the  bondholder,  and  in  so  far  as 
the  income  tax  law  applies  the  Government  will  not  differentiate 
between  coupons  from  bonds  of  this  character  and  those  from  bonds 
carrying  no  such  guarantee.  The  debtor  corporation,  or  its  duly 
authorized  withholding  agent,  will  be  held  responsible  for  the  nor- 
mal tax  due  on  the  coupons  on  which  no  tax  has  been  withheld  in 
cases  wherein  no  exemption  is  claimed. 

Income  paid  by  "debtors"  from  March  1  to  November  1,  1913, 
shall  be  included  in  the  return  of  the  individual  (under  column  B, 
page  2,  of  Form  1040)  as  income  upon  which  the  normal  tax  of  1 
per  cent  has  not  been  withheld  and  paid  at  the  source. 

Income  received  by  individuals  between  November  1  and  Decem- 
ber 31,  1913,  upon  which  the  normal  tax  has  been  withheld  at  the 
source  shall  be  included  in  their  annual  return  (under  column  A, 
page  2,  of  Form  1040)  as  income  upon  which  the  tax  has  been  paid. 

W.  H.  OSBORN, 
.Commissioner  of  Internal  Revenue. 


(T.  D.  1943.) 

Instructions  to  collectors  relative  to  fiduciaries  and  returns  to  be  made  by 

them  on  Form  1041. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  February  4,  1914. 
To  collectors  of  internal  revenue: 

T.  D.  1908  provides  that  all  fiduciaries  shall  on  or  before  March  1 
of  each  year,  when  the  annual  interest  of  any  beneficiary  in  the  in- 
come of  the  estate  or  trust  is  in  excess  of  $3,000  ($2,500  for  the 
year  1913),  make  and  render  a  return  of  the  income  of  the  person 
or  persons  (the  beneficiaries)  for  whom  they  act  to  the  collector 
of  internal  revenue  of  the  district  in  which  the  fiduciary  resides. 

73 


INCOME   TAX 


Where  a  decedent  died  after  March  1  in  the  year  1913,  and  from 
March  1  up  to  the  date  of  his  death  had  a  net  income  of  $2,500  or 
more,  the  fiduciary  (i.  e.,  the  executor  or  administrator)  should 
make  a  return  for  the  decedent  on  Form  1040,  and  the  income  tax, 
both  normal  and  additional,  shown  to  be  due  thereon  will  be  a  debt 
against  the  estate  of  the  decedent.  The  same  principle  will  apply 
*  to  subsequent  years  if  the  net  income  of  the  decedent  from  January 
1  to  the  date  of  his  death  amounts  to  $3,000  or  more.  No  other 
return  is  required  to  be  made  by  the  fiduciary  until  the  settlement 
of  the  estate  has  reached  the  stage  when  the  beneficiaries  thereof 
and  their  respective  interests  in  the  income  derived  from  the  estate 
are  determinable,  and  then  the  fiduciary  is  required  to  file  a  return 
on  or  before  March  1  of  each  year,  as  prescribed  by  the  regula- 
tions. 

The  fiduciary  will  enter  on  page  2  of  Form  1041,  under  the  ap- 
propriate heads,  all  income  accruing  to  the  beneficiaries  of  the 
trust  or  estate  from  March  1  to  December  31,  1913,  inclusive; 
but  the  interest  derived  from  the  obligations  of  a  State  or  any 
political  subdivision  thereof  and  the  obligations  of  the  United  States 
or  its  possessions  is  not  to  be  included. 

The  fiduciary  will  enter  on  page  3  of  Form  1041  for  the  year 
1913  five-sixths  of  the  deductions  allowable  under  paragraph  B 
of  the  law,  and  on  line  1  it  will  be  proper  for  the  fiduciary  to  enter 
all  legitimate  expenses  incurred  in  administering  the  estate  or 
trust.  If  the  fiduciary  holds  and  rents  business  or  residential 
property  and  pays  insurance,  water  rents,  commissions  for  the  col- 
lection of  rents,  or  any  other  necessary  expenses  in  managing  the 
estate  or  trust,  it  will  be  proper  to  enter  same  on  line  1  as  an 
allowable  deduction. 

The  amount  to  be  shown  on  page  1,  line  3,  will  represent  the 
total  amount  of  income  accruing  through  the  fiduciary  to  the  bene- 
ficiaries of  the  estate  or  trust  which  is  subject  to  the  normal  tax, 
and  when  the  interest  of  any  one  beneficiary  in  this  amount  from 
November  1  to  December  31,  1913,  inclusive,  was  in  excess  of 
$3,000,  whether  distributed  or  not,  the  fiduciary  was  required  to 
withhold  and  pay  the  normal  tax  on  the  whole  $3,000  and  excess 
thereof,  unless  the  beneficiary  filed  with  the  fiduciary  Form  1007, 
as  prescribed  by  the  regulations,  claiming  exemption  under  para- 
graph C,  and  in  that  event  the  fiduciary  was  only  required  to  with- 
hold and  pay  the  normal  tax  on  the  amount  in  excess  of  the  exemp- 
tion claimed. 

T.  D.  1906  prescribes  that  when  fiduciaries  make  their  annual 
return  they  shall  give  the  name  and  full  address  of  each  beneficiary 
and  the  share  of  income  to  which  each  may  be  entitled,  which 
information  shall  be  given  on  page  1  of  Form  1041.  In  the  column 
"Amount  of  income  paid  or  accrued  to  beneficiaries"  should  be 
entered  the  respective  interest  of  the  beneficiary  in  the  amount  of 
income  as  shown  on  page  1,  line  3. 

When  the  interest  of  any  beneficiary  in  the  amount  of  income 
subject  to  the  normal  tax,  as  shown  on  Form  1041,  page  1,  line  3, 

74 


TREASURY  DECISIONS 

is  in  excess  of  $3,000,  and  the  same  was  paid  to  the  beneficiary 
within  the  period  from  November  1  to  December  31,  1913,  both 
dates  inclusive,  the  fiduciary  was  required  to  withhold  and  pay  the 
normal  tax  as  prescribed  by  the  regulations,  and  the  information 
required  should  be  given  on  Form  1041,  page  1,  giving  the  name 
and  full  address  of  each  beneficiary,  the  amount  of  income  paid  or 
payable  to  each  beneficiary  (this  amount  would  be  the  beneficiary's 
interest  in  the  amount  of  income  subject  to  the  normal  tax  as  shown 
on  line  3),  the  amount  of  exemption  claimed  under  paragraph  C 
(if  any),  the  amount  of  income  on  which  normal  tax  should  be 
withheld,  and  the  amount  of  tax  withheld,  all  to  be  given  in  the 
respective  columns  in  the  order  named. 

A  fiduciary  acting  for  a  minor  or  insane  person  who  had  a  net 
income  of  $2,500  or  more  for  the  year  1913  will  make  the  return 
for  his  ward  on  Form  1040  and  will  not  be  required  to  file  a  re- 
turn on  Form  1041,  unless  he  has  more  than  one  ward  by  reason  of 
the  same  estate  or  trust;  then  in  that  event  a -return  will  be  required 
on  Form  1041,  and  a  separate  return  on  Form  1040  for  each  ward 
having  a  net  income  of  $2,500  or  more  for  the  year  1913. 

The  income  accruing  or  paid  to  a  beneficiary  through  a  fiduciary 
may  be  composed  in  part  of  dividends,  or  income  upon  which  the 
normal  tax  has  been  withheld  and  paid  or  to  be  paid  at  the  source, 
or  income  derived  from  the  obligations  of  a  State  or  any  political 
subdivision  thereof  or  from  the  obligations  of  the  United  States  or 
its  possessions  (income  from  obligations  of  a  State  or  any  political 
subdivision  thereof  and  from  the  obligations  of  the  United  States 
or  its  possessions  is  not  subject  to  the  tax  and  should  not  be  in- 
cluded). If  a  beneficiary  has  other  income  which,  added  to  the  in- 
come accruing  to  him  through  his  fiduciary,  gives  him  a  net  income 
of  $2,500  or  more  for  the  period  from  March  1  to  December  31, 
1913,  inclusive,  he  should  make  a  return  of  his  gross  income  on 
Form  1040,  as  required  by  the  regulations. 

To  illustrate:  If  a  fiduciary's  gross  income  was  $10,000,  derived 
from  the  following  sources: 

1.  Interest  upon  the  obligations  of  the  United  States $1,000 

2.  Dividends  on  stock  or  net  earnings  of  corporations 2,000 

3.  Interest   from   bonds   containing   "tax-free  covenant  clause,"   upon 

which  the  fiduciary  did  not  claim  any  exemption  at  source  and 
which  he  entered  on  Form  1041,  on  page  2,  column  A,  as  income 
on  which  normal  tax  was  withheld 2,000 

4.  Income  from  rents,  etc 5,000 

10,000 


the  fiduciary's  return  on  Form  1041  would  show  as  follows: 

Page  2.  Line  3,  column  B,  amount  of  rents $5,000 

Line  5,  interest  from  bonds,  "tax-free  clause,"  column  A 2,000 

Line  10,  dividends 2,000 

Aggregate  total  of  gross  income 9,000 

75 


INCOME    TAX 

(No  entry  of  interest  on  United  States  bonds,  $1,000.) 
Page  3.  Line  1,  Accessary  expenses  actually  paid  in  carrying  on  busi- 
ness, including  compensation  of  fiduciary,  water  rents,  insur- 
ance,  etc 450 

Line  3,  taxes  paid  400 

Line  6,  actual  repairs  made  on  building,  or  amount  allowed  for 

wear  and  tear  150 

Line  7,  dividends  not  subject  to  normal  tax 2,000 

Line  8,  amount  of  income  on  which  normal  tax  has  been  de- 
ducted and  withheld  at  source,  bonds  with  "tax-free  clause".     2,000 

Total  deductions 5,000 

Page  1.  Line  1,  gross'  income 9,000 

Line  2,  total  deductions 5,000 


Line  3,  amount  of  income  due  beneficiary,  which  -is  subject  to 
normal  tax 4,000 

The  beneficiary  has  filed  with  the  fiduciary  as  a  withholding  agent 
a  claim  for  exemption  under  paragraph  C  for  $2,500  (exemption 
of  single  person  for  1913),  and  the  return  on  Form  1041  would 
show  on  page  1,  in  addition  to  the  foregoing  entries,  the  following: 

John  Doe,  76  B-  Street,  New  York  City. 

In  third  column,  amount  of  income  paid  or  accrued  to  beneficiary $4,000 

In  fourth  column,  amount  of  exemption  claimed 2,500 

In  fifth  column,  amount  of  income  on  which  fiduciary  is  liable  to  tax. .     1,500 
In  sixth  column,  amount  of  normal  tax  withheld 15 

In  the  foregoing  illustration  the  beneficiary,  in  his  return  on 
Form  1040,  would  make  no  return  of  item  1,  interest  on  United 
States  bonds.  Item  2,  dividends,  would  be  entered  on  page  2,  line 
11,  and  for  the  purpose  of  calculating  the  normal  tax  would  be  an 
allowable  deduction  on  page  1,  line  4.  Item  3,  interest  on  bonds, 
would  be  entered  on  page  2,  line  7,  column  A,  and  for  the  purpose 
of  calculating  the  normal  tax  would  be  an  allowable  deduction  on 
page  1,  line  5.  Item  4,  rents,  would  be  entered  on  page  2,  line  7; 
$1,500  in  column  A,  and  $2,500  in  column  B  (exemption  of  $2,500 
claimed  and  no  tax  withheld  on  this  amount).  This  would  show- 
Income  received  from  fiduciary  subject  to  be  returned  on  Form  1040. .  $8,000 

Deductions  and  exemption  allowable  in  calculating  normal  tax 8,000 

No  normal  tax  due,  it  having  been  paid  at  the  source  by  the  fiduciary 

as  shown  by  his  return  on  Form  1041. 

In  making  the  foregoing  entry  on  Form  1040,  on  line  11,  there 
should  be  written  just  above  the  printed  heading,  " Amount  received 
from  fiduciary,"  and  the  amount  should  be  entered  in  the  appro- 
priate column. 

No  illustration  is  given  of  income  accruing  to  the  beneficiary 
from  other  sources,  an  illustration  of  this  not  being  deemed  neces- 
sary, as  such  income  is  entered  in  the  usual  way. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 

76 


TREASURY  DECISIONS 
(T.  D.  1945.) 

Regulation  relative  to  exclusion  of  income  derived  from  dividends  or  net 
earnings  of  corporations,  joint-stock  companies  or  associations,  and  in- 
surance companies  by  persons  subject  to  the  normal  tax  only  in  computing 
their  net  income  for  the  taxable  year. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington  D.  C.,  February  J,  1914. 
To  collectors  of  internal  revenue: 

Referring  to  that  portion  of  the  income-tax  law  which  reads  as 
follows : 

Provided  further,  That  persons  liable  for  the  normal  income  tax  only,  on 
their  own  account  or  in  behalf  of  another,  shall  not  be  required  to  make 
return  of  the  income  derived  from  dividends  on  the  capital  stock  or  from  the 
net  earnings  of  corporations,  joint-stock  companies  or  associations,  and  insur- 
ance companies  taxable  upon  their  net  income  as  hereinafter  proyided — 
you  are  informed  that  returns  of  individuals,  when  such  individuals 
are  subject  to  the  normal  tax  only,  need  not  include  the  income 
derived  from  the  dividends  or  net  earnings  referred  to  above. 
When  individuals  are  subject  to  the  additional  tax,  such  income 
derived  from  said  dividends  or  net  earnings  must  be  shown  on  the 
return. 

Persons  having  an  annual  net  income  of  $3,000  or  more,  includ- 
ing the  income  derived  from  dividends  or  net  earnings  of  corpora- 
tions, etc.,  but  whose  total  net  income  is  less  than  $20,000  and 
whose  net  income,  exclusive  of  the  income  derived  from  dividends 
or  net  earnings  of  such  corporations,  etc.,  is  less  than  $3,000  for  the 
taxable  year  ($2,500  for  the  year  1913),  shall  not  be  required  to 
make  a  return  of  annual  net  income. 

Returns  which  have  been  or  may  be  received  from  persons  sub- 
ject to  the  normal  tax  only,  in  which  such  dividends  are  included 
and  deducted,  need  not  be  changed  to  meet  the  provisions  of  this 
regulation. 

All  previous  rulings  of  the  department,  including  the  general 
regulations  No.  33,  are  amended  accordingly. 

W.  H.   OSBORN, 

Commissioner  of  Internal  Revenue. 


(T.  D.  1946.) 

Special  assessment  districts  created  under  the  laws  of  the  several  States  for 
public  purposes,  such  as  the  improvement  of  streets  and  public  highways, 
the  provision  for  sewerage,  gas,  and  light,  and  the  reclamation,  drainage, 
or  irrigation  of  bodies  of  land,  and  levee  and  school  districts  are  held  to 
be  political  subdivisions  of  a  State. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  February  10,  1914. 
To  collectors  of  internal  revenue: 

Referring  to  paragraph  B,  section  2,  of  the  income-tax  law,  which 
reads  as  follows: 

77 


INCOME    TAX 

That  in  computing  net  income  there  shall  be  excluded  interest  upon  the 
obligations  of  a  State  or  any  political  subdivision  thereof — 

you  are  informed  that  under  date  of  January  30,  1914,  the  honor- 
able the  Attorney  General  held  that  special  assessment  districts 
created  under  the  laws  of  the  several  States  for  public  purposes, 
such  as  the  improvement  of  streets  and  public  highways,  the  provi- 
sion for  sewerage,  gas,  and  light,  and  the  reclamation,  drainage, 
or  irrigation  of  bodies  of  land  within  such  special  assessment  dis- 
tricts when  such  districts  are  for  public  use,  are  political  subdivi- 
sions of  the  State  within  the  meaning  of  the  above  proviso. 

It  is  held  that  the  term  "political  subdivision"  includes  special 
assessment  districts  or  divisions  of  a  State  created  by  the  proper 
authority  of  the  State  acting  within  its  constitutional  powers  and 
under  its  general  laws,  for  the  purpose  of  carrying  out  a  portion  of 
those  functions  of  the  State  which  by  long  usage  and  inherent 
necessities  of  government  have  always  been  regarded  as  public. 

Levee  and  school  districts  when  lawfully  created  under  the  au- 
thority of  the  State  and  which  are  authorized  by  the  laws  of  the 
State  to  levy  a  tax  to  meet  the  obligations  of  such  districts  are  also 
held  to  be  political  subdivisions  of  a  State  within  the  meaning  of 
the  income-tax  law. 

The  income  derived  from  interest  upon  the  obligations  of  all 
such  public  districts  shall  therefore  be  excluded  in  computing  net 
income  for  the  income  tax. 

This  decision  supersedes  T.  D.  191CX 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


(T.  D.  1947.) 

Extending  T.  D.  1945  to  cover  returns  made  by  fiduciaries  in  their  fiduciary 

capacity. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  February  12,  1914. 
To  collectors  of  internal  revenue: 

You  are  advised  that  the  provisions  of  T.  D.  1945 — in  matter 
of  exclusion  of  dividends  or  net  earnings  of  corporations,  joint- 
stock  companies  or  associations,  and  insurance  companies,  by  per- 
sons subject  to  the  normal  tax  only,  in  computing  their  net  income 
for  the  taxable  year — are  extended  to  cover  such  returns  by  fidu- 
ciaries. 

To  make  clear  any  doubt  on  the  subject,  the  provisions  of  T.  D. 
1945  are  hereby  specifically  extended  to  include  returns  made  by 
fiduciaries  as  such. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue, 


TREASURY  DECISIONS 

(T.  D.  1948.) 

Amendment  of  T.  D.   1942. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  February  12,  1914. 
To  collectors  of  internal  revenue: 

T.  D.  1942  is  hereby  amended  as  follows : 

In  the  first  paragraph,  after  the  word  "income,"  insert  tax  on 
which  is,  and  after  the  word  "paid"  insert  or  to  be  paid.  In  the 
second  paragraph,  for  words  "on  the  coupons  on  which,"  substitute 
in  such  cases  when,  and  for  words  "in  cases  wherein,"  substitute 
the  word  and.  In  the  third  paragraph,  for  the  word  "paid,"  sub- 
stitute the  word  withheld. 

So  that  the  decision  as  amended  will  read: 

"This  office  is  in  receipt  of  numerous  letters  asking  whether  in- 
come, tax  on  which  is  paid  or  to  be  paid  at  the  source,  although 
not  withheld  at  the  source,  can  be  placed  in  column  A,  page  2,  of 
Form  1040,  and  in  reply  to  this  inquiry  you  will  advise  as  follows : 

"The  stipulation  in  bonds  whereby  the  tax  which  may  be  assessed 
against  them  or  the  income  therefrom  is  guaranteed,  is  a  contract 
wholly  between  the  corporation  and  the  bondholder,  and  in  so  far 
as  the  income-tax  law  applies,  the  Government  will  not  differen- 
tiate between  coupons  from  bonds  of  this  character  and  those 
from  bonds  carrying  no  such  guaranty.  The  debtor  corporation, 
or  its  duly  authorized  withholding  agent,  will  be  held  responsible 
for  the  normal  tax  due  in  such  cases  when  no  tax  has  been  with- 
held and  no  exemption  claimed. 

"Income  paid  by  'debtors'  from  March  1  to  November  1,  1913, 
shall  be  included  in  the  return  of  the  individual  (under  column  B, 
page  2,  of  Form  1040)  as  income  upon  which  the  normal  tax  of  1 
per  cent  has  not  been  withheld  and  paid  at  the  source.  Income 
received  by  individuals  between  November  1  and  December  31, 
1913,  upon  which  the  normal  tax  has  been  withheld  at  the  source 
shall  be  included  in  their  annual  return  (under  column  A,  page  2, 
of  Form  1040)  as  income  upon  which  the  tax  has  been  withheld." 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


(T.  D.  1950.) 

Time  for  filing  returns  of  income,  and  penalties  in  connection  therewith. 

Washington,  D.  C.,  February  19,  1914. 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

TREASURY  DEPARTMENT, 
To  collectors  of  internal  revenue: 

You  are  advised,  and  will  so  announce  from  your  respective 
offices,  that  the  law  and  regulations  require  returns  of  income  for 
the  taxable  period,  March  1  to  December  31,  1913,  to  be  made  and 

79 


INCOME    TAX 

filed  on  or  before  March  1,  1914.  The  law  is  mandatory  and 
allows  no  discretion  to  be  exercised  by  any  officer.  Section  3176, 
Revised  Statutes  of  the  United  States,  as  amended  and  made 
part  of  the  income-tax  law,  gives  to  collectors  of  internal  revenue 
(they  being  satisfied  as  to  the  merits  of  the  claim,  and  in  the  rea- 
sonable exercise  of  their  judgment  and  discretion)  authority  to 
grant  extension  of  time  not  to  .exceed  30  days  from  the  time  pre- 
scribed by  law  in  which  to  file  a  return  of  net  income,  and  then 
only  in  cases  where  such  failure,  neglect,  or  refusal  is  the  result 
of  "sickness  or  absence." 

You  are  also  advised,  and  will  so  announce,  that  there  will  be  no 
change  in  income-tax  regulations  as  they  now  exist  prior  to  March 
1,  1914,  and  that  all  persons  and  corporations  required  to  make  a 
return  which  have  not  as  yet  done  so  should  make  and  file  their 
returns  at  the  earliest  opportunity  and  on  or  before  March  1. 

Collectors  will  forward  to  this  office  immediately  a  report  show- 
ing the  number  of  returns  filed  in  their  respective  offices  as  of 
February  20,  1914. 

Penalties  and  additional  tax,  in  connection  with  refusal  or  neglect 
to  file  return  of  income  within  the  prescribed  time. 

As  to  corporations. — For  neglect  or  refusal  to  make  a  return 
within  the  prescribed  time,  corporations  are  liable  to  a  penalty  not 
to  exceed  $10,000;  and  in  case  of  neglect  or  refusal  to  make,  or  for 
a  false  or  fraudulent  return  made,  100  per  cent  is  to  be  added 
to  the  tax ;  and  in  the  case  of  neglect  or  refusal  to  make  and  verify 
a  return  within  the  prescribed  time  (except  in  case  of  sickness  or 
absence)  50  per  cent  is  to  be  added  to  the  tax;  and  in  case  of  an 
officer  of  a  corporation  or  like  institution  charged  with  the  duty 
and  responsibility  of  making  and  verifying  a  return  who  makes  a 
false  or  fraudulent  return  with  the  intent  to  defeat  or  evade  any 
assessment  or  tax,  he  shall  be  guilty  of  a  misdemeanor,  and  be  sub- 
ject to  a  fine  not  to  exceed  $2,000,  or  to  imprisonment  not  to  ex- 
ceed one  year,  or  both,  at  the  discretion  of  the  court,  together  with 
costs. 

As  to  individuals. — For  neglect  or  refusal  to  make  a  return 
within  the  prescribed  time,  the  penalty  is  not  less  than  $20  nor 
more  than  $1,000;  and  in  case  of  intentional  neglect  or  refusal 
to  make,  or  for  a  false  or  fraudulent  return  made,  there  shall  be 
added  100  per  cent  to  the  tax;  and  in  case  of  neglect  or  refusal 
to  make  a  return  within  the  prescribed  time  (except  in  case  of 
sickness  or  absence)  there  shall  be  added  50  per  cent  to  the  tax. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


80 


TREASURY  DECISIONS 
(T.  D.  1953.) 

Extension  of  time  for  filing  returns  under  income-tax  law  by  citizens  of  the 
United  States  living  abroad. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  March  2,  1914. 
To  collectors  of  internal  revenue: 

Referring  to  that  portion  of  section  3176,  as  incorporated  in 
the  income-tax  law,  which  provides  that — 

In  case  of  neglect  occasioned  by  sickness  or  absence  as  -aforesaid,  the  col- 
lector may  allow  such  further  time  for  making  and  delivering  such  list  or 
return  as  he  may  deem  necessary,  not  exceeding  thirty  days — 

you  are  infprmed  as  follows: 

Various  citizens  of  the  United  States  living  abroad  were  unable 
through  such  absence  from  this  country  to  inform  themselves  as 
to  the  requirements  of  the  law,  and  were  also  unable  to  obtain  the 
necessary  blank  forms  on  which  to  make  their  returns  of  annual 
net  income  for  the  income  tax.  You  are  therefore  authorized  to 
mark  the  returns  received  from  foreign  countries  after  March  2, 
and  up  to  and  including  March  31  as  having  the  time  extended  to 
cover  the  period  of  filing  such  return. 

The  State  Department  has  cabled  the  consular  service  and  others 
residing  in  foreign  countries  that  they  shall  forward  a  letter,  in 
which  their  income  shall  be  stated,  and  that  such  letter  will  be  re- 
ceived in  lieu  of  the  return  so  far  as  the  date  of  filing  is  con- 
cerned. 

Such  letters  are  now  coming  to  this  office,  and  they  are  being  for- 
warded to  the  various  collection  districts  to  be  held  as  tentative 
returns  until  the  returns  on  Form  1040  shall  be  received.  The 
regular  returns  on  Form  1040  when  received  should  be  attached  to 
the  tentative  returns  and  both  should  be  forwarded  to  this  office 
with  the  assessment  lists  on  which  the  same  shall  be  listed.  The 
date  of  filing  the  returns  should  be  considered  that  on  which  such 
tentative  returns  were  filed. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


(T.  D.  1957  ) 

Partnerships  are  not  subject  to  income  tax,  but  are  required  to  file  certificates 
of  ownership  of  bonds,  etc.,  in  connection  with  coupon  and  registered  in- 
terest payments  to  prevent  withholding  of  their  income  at  the  source. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  March  12,  1914. 
To  collectors  of  internal  revenue: 

Referring  to  the  following  provision  in  paragraph  D  of  the  in- 
tome-tax  law — 

81 


INCOME   TAX 

That  any  persons  carrying  on  business  in  partnership  shall  be  liable  for  in- 
come tax  only  in  their  individual  capacity,  and  the  share  of  the  profits  of  a 
partnership  to  which  any  taxable  partner  would  be  entitled  if  the  same  were 
divided,  whether  divided  or  otherwise,  shall  be  returned  for  taxation  and  the 
tax  paid,  under  the  provisions  of  this  section,  and  any  such  firm,  when  re- 
quested by  the  Commissioner  of  Internal  Revenue,  or  any  district  collector, 
shall  forward  to  him  a  correct  statement  of  such  profits  and  the  names  of  the 
individuals  who  would  be  entitled  to  the  same,  if  distributed — 

it  is  held  that  the  income  of  partnerships  per  se  is  not  subject  to 
the  income  tax.  The  provisions  of  the  law  "relating  to  the  de- 
duction and  payment  of  the  tax  at  the  source  of  income"  do  not 
apply  to  the  income  of  partnerships  as  such.  Taxable  members  of 
partnerships  will  be  required  to  account,  in  their  individual  re- 
turns, for  their  respective  shares  or  interest  in  the  partnership 
profits,  whether  the  same  are  divided  and  distributed  or  not. 

Partnerships  owning  "bonds  and  mortgages,  or  deeds  of  trust,  and 
other  similar  obligations  of  corporations,  joint  stock  companies  or 
associations,  and  insurance  companies,"  shall  file  certificates  of 
ownership,  in  Form  1001,  evidencing  the  fact  of  partnership  owner- 
ship when  presenting  for  collection  or  payment  coupons  or  interest 
orders  for  interest  upon  said  obligations;  and  when  such  certifi- 
cates are  filed,  the  tax  on  such  interest  payments  to  partnerships 
shall  not  be  withheld. 

The  last  sentence  in  article  14,  page  35,  and  article  47  of  Income 
Tax  Regulations  No.  33,  providing  for  claim  by  partnerships  for 
deduction  for  legitimate  expense  incurred  in  conducting  the  busi- 
ness of  a  partnership,  are  hereby  superseded  and  repealed. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


(T.  D.  1960.) 

Corporations  are  allowed  by  law  to  deduct  interest  actually  accrued  and  paid 
within  the  year  on  an  amount  not  in  excess  of  paid-up  capital  stock  out- 
standing at  the  close  of  the  year,  plus  one-half  the  interest-bearing  indebt- 
edness then  also  outstanding. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  March  18,  1914. 
To  collectors  of  internal  revenue: 

Your  attention  is  called  to  that  provision  of  the  income-tax  law 
designated  as  the  third  deduction,  subdivision  (b),  paragraph  G, 
reading  as  follows: 

The  amount  of  interest  accrued  and  paid  within  the  year  on  its  indebtedness 
to  an  amount  of  such  indebtedness  not  exceeding  one-half  of  the  sum  of  its 
interest-bearing  indebtedness  and  its  paid-up  capital  stock  outstanding  at  the 
close  of  the  year,  and  if  no  paid-up  capital  stock,  the  amount  of  interest  paid 
within  the  year  on  an  amount  of  its  indebtedness  not  exceeding  the  amount 
of  capital  employed  in  the  business  at  the  close  of  the  year. 

It  is  held  that  in  the  case  of  a  corporation  having  capital  stock 
this  deductible  interest  is  interest  actually  accrued  and  paid  within 
the  year  on  an  amount  of  indebtedness  not  exceeding  the  paid-up 

82 


TREASURY  DECISIONS 

capital  stock  outstanding  at  the  close  of  the  year,  increased  by  the 
addition  thereto  of  one-half  the  interest-bearing  indebtedness  out- 
standing at  the  close  of  the  year. 

The  qualifying  phrase,  "outstanding  at  the  close  of  the  year," 
appearing  in  the  foregoing  quotation,  is  held  to  apply  to  both 
paid-up  capital  stock  and  indebtedness,  and  "one-half  the  sum  of" 
qualifies  only  the  indebtedness,  which  indebtedness,  like  the  paid-up 
capital  stock,  is  required,  by  the  law  to  be  reported,  in  making  re- 
turn of  annual  net  income,  as  outstanding  at  the  close  of  the  year. 

If  no  indebtedness  is  outstanding  at  the  close  of  the  year,  the 
maximum  deduction  allowable  on  account  of  interest  paid  will  be 
the  amount  of  interest  actually  accrued  and  paid  on  an  amount  of 
indebtedness  not  exceeding  at  any  time  within  the  year  the  entire 
paid-up  capital  stock  outstanding  at  the  close  of  the  taxable  year; 
that  is,  in  such  case,  the  paid-up  capital  stock  outstanding  at  the 
close  of  the  year  measures  the  highest  amount  of  indebtedness  upon 
which  deductible  interest  can  be  computed. 

For  the  purpose  of  an  allowable  deduction,  interest  on  the  maxi- 
mum amount  of  indebtedness,  determined  in  the  manner  above  indi- 
cated, can  be  computed  upon  such  amount  only  for  the  time  during 
which  such  amount  of  indebtedness  is  not  in  excess  of  the  paid-up 
capital  stock,  increased  by  one-half  the  sum  of  the  interest-bear- 
ing indebtedness  outstanding  at  the  close  of  the  year. 

In  any  event,  the  amount  of  interest,  in  order  to  constitute  an 
allowable  deduction,  must  not  only  be  within  the  limit  of  the  law  as 
herein  defined,  but  must  have  actually  accrued  and  been  paid  within 
the  year  for  which  the  return  is  made. 

In  cases  where  no  capital  stock  exists,  the  limitation  as  to  deduc- 
tion is  confined  to  interest  actually  paid  on  an  amount  of  indebted- 
ness not  exceeding  at  any  time  during  the  year  the  capital  employed 
in  the  business  at  the  close  of  the  year. 

Any  provision  in  the  regulations  heretofore  issued  inconsistent 
with  the  foregoing  is  hereby  revoked. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


(T.  D.  1961.) 

Fiduciaries. 

Forms^  1015  and  1019  may  be  adapted  so  that  but  one  certificate  will  be  re- 
quired to  be  filed  with  coupons  from  the  same  issue  of  bonds,  the  property 
of  different  estates  or  trusts. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  March  19,  1914. 
To  collectors  of  internal  revenue: 

Under  income-tax  regulations  No.  33,  article  39  and  70,  fidu- 
ciaries are  required  to  file  certificates  on  Form  1015  or  Form  1019, 


INCOME    TAX 

according  to  the  nature  of  the  claim  to  be  made  by  the  fiduciary, 
for  each  issue  of  bonds  and  for  each  trust. 

It  is  therefore  provided  that  where  fiduciaries  have  the  custody 
and  control  of  more  than  one  estate  or  trust,  and  said  estates  or 
trusts  have  as  assets  bonds  of  corporations,  etc.,  of  the  same  issue, 
said  fiduciaries  may  adapt  certificates  Form  1015  or  Form  1019  by 
changing  the  words  "estate  or  trust"  in  lines  2  and  3  of  said  forms 
to  the  plural,  and  inserting  in  the  blank  space  provided  in  line  3 
of  said  forms  for  the  description  of  the  estate  or  trust  the  words 
"As  noted  on  the  back  hereof."  In  such  cases  the  notation  on  the 
back  of  the  certificate  should  show  for  each  estate  or  trust  (a)  the 
name  of  the  estate  or  trust,  (b)  the  amount  of  the  bond,  (c)  the 
amount  of  the  interest.  In  all  other  respects  the  certificates  should 
be  filled  out  as  indicated  thereon. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


(T.  D.  1962.) 

Information    contained   in    income-tax    returns   to    be   treated    as    inviolably 

confidential. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  March  20,  1914. 

To    collectors   of   internal  revenue,   internal-revenue   agents,   and 
others  concerned: 

The  attention  of  collectors  of  internal  revenue,  internal- revenue 
agents,  and  other  officers  concerned  is  invited  to  section  3167  of 
the  United  States  Revenue  Statutes,  which  prohibits  the  disclosure 
of  information  contained  in  income  and  other  returns  of  internal- 
revenue  taxpayers. 

All  internal-revenue  officers  will  preserve  as  inviolably  confiden- 
tial all  income-tax  returns,  as  the  slightest  infraction  of  law  upon 
this  subject  will  be  severely  punished. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


(T.  D.  1963.) 

Acceptance  of  certified  checks  in  payment  of  internal-revenue  taxes. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  March  18,  1914. 

SIR:  This  office  is  in  receipt  of  your  letter  of  the  16th  instant  in 
reference  to  certified  checks  offered  in  payment  of  internal-revenue 
taxes  and  to  the  refusal  of  your  depository  to  accept  such  checks 
where  you  indorse  the  same  "ivithout  recourse." 

84 


TREASURY  DECISIONS 

In  reply  you  are  informed  that  such  qualified  indorsement  is  un- 
necessary, and  that  any  instructions  on  Forms  17,  21,  and  647  con- 
trary to  this  view  are  hereby  rescinded. 

In  this  connection  attention  is  called  to  the  act  of  March  2,  1911 
(p.  108,  Comp.,  1911),  respecting  such  checks  not  duly  paid  by 
the  bank  certifying  to  the  same. 

Respectfully,  W.  H.  OSBORN, 

Commissioner  of  Internal  Revenue. 
COLLECTOR  FIRST  DISTRICT,  Brooklyn,  N.  Y. 


(T.  D.  1965.) 

Advance  payment  of  tax  withheld  by  withholding  agents  not  to  be  made  prior 
to  30  days  preceding  the  date  on  which  the  annual  return  is  required  to  be 
filed. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  March  23,  1914. 
To  collectors  of  internal  revenue: 

Attention  is  directed  to  note  A  appearing  on  the  bottom  of  Forms 
1012,  1012c,  1043,  and  1044,  providing  that- 
Withholding  agents  may,  if  they  so  desire,  pay  at  the  time  this  list  is  filed, 
to  the  collector  of  internal  revenue  with  whom  the  list  is  filed,  the  amount  of 
tax  withheld  during  the  month  for  which  the  list  is  made, 
And  to  note  A,  Form  1042,  providing  that — 

The  amount  of  the  tax  withheld  during  the  year  for  which  the  list  is  made, 
may  be  paid  to  the  collector  at  the  time  the  list  is  filed. 

In  order  that  persons  whose  income  tax  is  deducted  and  withheld 
and  is  to  be  paid  at  the  source,  may  have  an  opportunity  to  file 
with  the  source  which  is  required  to  withhold  and  pay  tax  for  them 
certificates  claiming  the  benefit  of  deductions  and  exemptions  pro- 
vided for  in  paragraph  B  and  allowed  in  paragraph  C  of  the  law, 
withholding  agents  will  not  pay  to  collectors  of  internal  revenue  the 
tax  withheld  by  them  under  the  law  until  after  the  time  for  filing 
claims  for  deductions  and  exemptions  has  expired.  See  Regula- 
tions No.  33,  art.  33,  (a)  and  (b). 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


(T.  D.  1967.) 

Organizations,  etc.,  exempted  by  the  first  proviso  of  paragraph  G  of  section  2 
of  the  act  of  October  3,  1913,  from  payment  of  the  income  tax,  are  not 
subject  to  the  provisions  of  the  income-tax  law  as  withholding  agents. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  March  25,  1914. 
To  collectors  of  internal  revenue: 

This  office  is  in  receipt  of  several  communications  relative  to  the 
duty  as  withholding  agents  of  religious  corporations  and  other  or- 

85 


INCOME   TAX 

ganizations  which  are  specifically  enumerated  in  the  first  proviso 
of  paragraph  G  of  section  2  of  the  act  of  October  3,  1913. 

The  language  of  said  proviso  is  as  follows : 

That  nothing  in  this  section  shall  apply  to  labor,  agricultural,  or  horticul- 
tural organizations,  or  to  mutual  savings  banks  not  having  a  capital  stock 
represented  by  shares,  or  to  fraternal  beneficiary  societies,  orders,  or  associa- 
tions operating  under  the  lodge  system  or  for  the  exclusive  benefit  of  the 
members  of  a  fraternity  itself  operating  under  the  lodge  system,  and  providing 
for  the  payment  of  life,  sick,  accident,  and  other  benefits  to  the  members  of 
such  societies,  orders,  or  associations  and  dependents  of  such  members;  nor 
to  domestic  building  and  loan  associations ;  nor  to  cemetery  companies,  organ- 
ized and  operated  exclusively  for  the  mutual  benefit  of  their  members ; 
nor  to  any  corporation  or  association  organized  and  operated  exclusively  for 
religious,  charitable,  scientific,  or  educational  purposes,  no  part  of  the  net  in- 
come of  which  inures  to  the  benefit  of  any  private  stockholder  or  individual ; 
nor  to  business  leagues ;  nor  to  chambers  of  commerce  or  boards  of  trade,  not 
organized  for  profit  or  no  part  of  the  net  income  of  which  inures  to  the  benefit 
of  the  private  stockholder  or  individual ;  nor  to  any  civic  league  or  organiza- 
tion not  organized  for  profit  but  operated  exclusively  for  the  promotion  of 
social  welfare. 

You  are  therefore  advised  that  the  words  "this  section"  are  held 
to  refer  to  and  mean  the  whole  of  section  2  of  the  act  of  October  3, 
1913,  which  section  comprises  the  income-tax  law,  and  that  the 
words  "nothing  in  this  section  shall  apply  to"  were  intended  to 
relieve  such  organizations,  etc.,  as  properly  come  within  the  classi- 
fications referred  to  in  the  proviso  quoted,  not  only  from  the  pay- 
ment of  an  income  tax  but  from  every  obligation  or  requirement 
imposed  by  any  or  all  of  the  provisions  of  said  section  upon  with- 
holding agents. 

ROBT.  WILLIAMS,  JR., 
Acting  Cmmissioner  of  Internal  Revenue. 


(T.  D.  1973.) 

Revision  of  Form  1044,  monthly  list  return  of  amount  of  normal  income  tax 
withheld  by  first  bank  or  collecting  agency. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  April  21,  1914. 
To  collectors  of  internal  revenue: 

Collectors  are  hereby  advised  that  Form  1044,  for  monthly  list 
return  of  amount  of  normal  tax  withheld  by  first  bank  or  collecting 
agency,  has  been  revised  in  the  following  particulars,  so  that  the  tax 
withheld  from  interest  on  bonds  of  different  classes  or  of  more  than 
one  organization  can  be  reported  thereon : 

In  the  section  of  reading  matter  beginning,  "To  be  made  in  dupli- 
cate," in  the  fourth  line  thereof,  change  "coupon"  to  "coupons,"  and 
strike  out  "and  interest  orders." 

In  the  last  line,  next  above  the  tabular  list,  strike  out  the  blank 
lines  and  the  words  thereunder,  "Describe  the  particular  issue  of 
bonds,"  and  "State  name  and  address  of  debtor  organization." 
Strike  out  the  headings  in  the  tabular  list  and  substitute  therefor, 

86 


TREASURY  DECISIONS 

in  separate  columns,  "Party  presenting  coupons/'  and  immediately 
thereunder,  in  separate  columns,  "Name"  and  "Address,"  "Name 
of  debtor  corporation,"  "Name  of  particular  issue  of  bonds," 
"Amount  of  income  subject  to  tax,"  and  "Amount  of  tax  with- 
held." 

Immediately  after  and  under  the  line  of  totals  of  the  tabular  list 
there  shall  be  a  double  rule  line.  Strike  out  the  words  now  appear- 
ing below  the  total  line  of  the  tabular  list  on  Form  1044,  viz, 
"Amount  of  tax  remitted  herewith  (if  any)  to  collector,"  and 
strike  out  the  dotted  line  following  these  words,  and  also  the  dollar 
mark  on  the  same  line,  and  strike  out  the  double  rule  line  appear- 
ing immediately  thereunder. 

Strike  out  all  of  Note  A  appearing  at  the  bottom  of  the  form. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


(T.  D.  1974.) 

Change  of  regulations  as  to  certificates  of  ownership  in  connection  with  inter- 
est orders  or  checks  for  interest  on  registered  bonds. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

'Washington,  D.  C.,  April  21,  1914. 
To  collectors  of  internal  revenue: 

Articles  41  to  46  of  the  regulations  are  hereby  amended  so  as  to 
require,  in  the  case  of  interest  payments  on  bonds  registered  as  to 
both  principal  and  interest,  that  debtors  in  such  cases  shall  deduct 
the  normal  tax  of  1  per  cent  from  accruing  interest  on  all  such 
bonds  before  sending  out  orders  or  checks  for  said  interest  to  regis- 
tered owners,  unless  there  shall  be  filed  with  said  debtors,  at  least 
five  days  before  the  due  date  of  said  interest,  the  prescribed  certifi- 
cates claiming  exemption. 

Where  such  certificates  are  so  filed  the  said  debtors  shall  stamp 
or  write  on  the  interest  orders  or  checks,  as  the  case  may  be,  "Ex- 
emption claimed  by  certificate  filed  with  debtor." 

Where  prescribed  certificates  are  not  so  filed,  said  debtor  shall 
deduct  and  withhold  the  normal  tax  of  1  per  cent  from  the  amount 
of  such  payment,  and  shall  stamp  or  write  on  the  interest  order  or 
check,  as  the  case  may  be,  "Income  iax  withheld  by  debtor/' 

Responsible  banks,  bankers,  or  collecting  agents  receiving  for 
collection  interest  orders  or  checks  bearing  the  aforesaid  indorse- 
ments may  present  said  interest  orders  or  checks  for  collection 
without  requiring  that  certificates  of  ownership  be  filed  therewith. 

Certificates  of  ownership  are  not  required  to  accompany  interest 
orders  or  checks  in  payment  of  interest  on  fully  registered  bonds,  as 
information  as  to  ownership  of  bonds  will  be  furnished  by  debtor 
organizations  on  monthly  list  returns,  Form  1012;  but  claim  for 
exemption  must  be  filed  with  debtors,  or  the  tax  must  be  withheld ; 
and  the  form  of  certificate  provided  for  use  of  owners  of  coupon 

«7 


INCOME   TAX 

bonds  may  be  used  by  owners  of  registered  bonds  for  the  purpose 
of  claiming  this  exemption. 

Where,  because  of  failure  to  file  certificates  claiming  exemption, 
in  compliance  with  above  regulations,  a  part  of  the  income  from 
interest  on  registered  bonds  has  been  withheld  for  the  payment  of 
the  normal  income  tax,  debtors  may,  upon  the  filing  of  the  proper 
certificates  as  providedsin  article  42,  Income  Tax  Regulations/  to 
the  extent  of  exemption  claimed,  release  and  pay  to  the  persons 
entitled  thereto  the  amount  of  such  income  so  withheld. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


(T.  D.  1976.) 

Supplemental  regulations  prescribing  revised  forms  of  certificates  of  owner- 
ship, exemption,  and  substitute  certificates  in  lieu  of  such  certificates  now 
in  use. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  May  2,  1914. 

The  following  certificates  are  prescribed  in  lieu  of  certificates 
now  in  use,  and  are  to  be  used  in  complying  with  the  income-tax 
regulations  requiring  the  filing  of  certificates  when  presenting  cou- 
pons or  interest  orders  for  collection : 

Revised  Form  1000, 

Ownership  Certificate— Individual— EXEMPTION   NOT   CLAIMED, 
shall  be  in  the  following  form  and  shall  be  printed  on  white  paper : 


Form 
1000. 

K«Yl«ed. 


Ownership  Certlflcate-Indlvidual-EXEMPTION  NOT  CLAIMED. 

(To  be  furnished  with  coupons  or  interest  < 


. . . ,  191     .  Amount  of  coupon  or  registered  interest,  $ 


(Dale  of*  maturity  of  in  tires 

I  do  solemnly  declare  that  I  am  a  citizen  or  resident  of  the  United  States  and  am  the  owner  of  the  above-described  bonds  from 
which  were  detached  the  accompanying  coupons,  or  from  which  I  am  entitled  to  the  above-described  registered  interest,  and  that 
all  of  the  information  as  given  in  this  certificate  is  true  and  correct.  I  do  not  now  claim  exemption  from  having  the  normal  tax 
of  1  per  cent  withheld  from  said  income  by  the  debtor  at  the  source. 

Date, ,191  """  ~(Usu'J  busiiltsi  'si,;oalur'e  of  owner  of  bonda.) 


•NOTE  1.— To  he  filled  in  inly  when  duly  authorized  agent  executes  this  

certificate  for  ouTter,  in  which  case  the  name  ami  address  of  owner  must  be  t  evil  nost-oflice  address  of  owner  ) 

given,  and  collecting  aseat  first  receiving  certificate  must  stamp  across  face 
"Satisfied  as  to  identity  and  responsibility  of  agent"  (giving  name  and 
address  ot  collecting  agent). 

NOTE  2.— It  securities  arc  owned  jointly  by  severs!  persons  one  may  sifjn, 
and  the  names,  addresses,  and  proportion  of  ownership  of  each,  indorsed  on 
the  back  hereof.  

NOTE  3.— When  numbers  of  bonds  are  required  to  lie  given,  same  are  to  (Full  post-offio*  address  of  agent.) 

be  entered  on  back  hereof. 


•By Agent 

(Usual  business  «ignature  of  agent  authorized  to  sign  for  owner.) 


88 


TREASURY  DECISIONS 

On  the  back  of  said  certificate  there  shall  be  printed,  for  the  use 
of  joint  owners  of  bonds,  the  following  form,  to  wit: 

JOINT  OWNERS. 

If  securities  described  on  other  side  are  owned  jointly,  tbo  names  and  addresses  of  owners  and  the  proportion  of  ownership 
of  each  should  be  given.  . :— ?:M 


NAMES. 

FULL  Posi-OrncE  ADDEESSES. 

PBOPOKTIOX  OWNED. 

• 

Revised  Form  1000  B, 

Ownership  Certificate— Individual—  EXEMPTION  CLAIMED, 
shall  be  in  the  following  form,  and  shall  be  printed  on  yellow  paper 


Form 
1000  B 


Ownership  Certificate— Individual— EXEMPTION  CLAIMED. 


(Full  description  of  bonds,  giving  name  of  issue  »nd  Interest  rate.) 
191  Amount  at  coupon  or  registered  interest,  $ . 


(Date  of  maturity  of  Interest.) 
Total  exemption  allowed  under  paragraph  C,  $  ...............  .....  Amount  of  exemption  now  claimed,  $  ............... 

I  do  solemnly  declare  that  I  am  a  citizen  or  resident  of  the  United  States  and  am  the  owner  of  the  above-described  bonds  from 
•which  were  detached  the  accompanying  coupons,  or  from  which  I  am  entitled  to  the  above-described  registered  interest,  and  that 
all  of  the  information  aa  given  in  this  certificate  is  true  and  correct. 


Date 


191 


(Usual  business  signature  of  o 


NESS  zfuff  arowned  jointly  by  several  persons  one  may 
and  the  names,  addresses,  and  proportion  of  ownership  of  each.  Indorsed  o 
the  back  hereof. 

NOTE  3.—  When  numbers  of  bonds  are  required  to  be  given,  same  are  to 
be  entered  on  back  hereof. 

(SIGNATURES  MUST  BE  CLEARLY  AND  LEGIBLY  WRITTEN.) 


and       -^ej»Bv  Agent 

sign,  6^  '*&£  slgLamrVoV  agint  amho'riz'ed'*  aign  foYowner.) 


(Full  post-Kjfflce  address  of  agent.) 


On  the  back  of  said  certificate  there  shall  be  printed,  for  the  use 
of  joint  owners  of  bonds,  the  following  form,  to  wit : 

JOINT  OWNERS. 

If  £    -I-' ' '.  "=;  described  on  other  side  are  cTmcd  jointly,  the  narnea  »nd  addresses  of  owners  and  the  proportion  of  ownership 
of  each  6h'j*i;u  '(.-•«  gi/cu. 


FULL  POST-OT7ICE  Ar 


BBOPOKTlOlT  OWHZD. 


89 


INCOME    TAX 

'    Revised  Form  1001, 

Ownership    Certificate— FIRMS    AND    ORGANIZATIONS, 
shall  be  in  the  following  form,  and  shall  be  printed  on  yellow  paper 


Form 
1001. 

KeYised. 


Ownership  Certificate— FIRMS  OR  ORGANIZATIONS. 

(Showing  ownership  of  bond*,  which  la  to  be  furnished  by  flrma  or  organizations  not  subject  tp  withholding  of  I 


'{>uU description  of  iwndsYtfvuig  naoie'of" issue  ai>d~interest  ratio  "*" 

,191  Amount  of  coupon  or  registered  interest,  $. . 


(Dale  of  maturity  of  Interest.) 

I  do  solemnly  declare  that  -the  firm  or  organization  named  below,  and  of  which  I  am  a  member  or  an  officer,  is  the  owner  ol 
the  above-described  bonds  from  which  were  detached  the  accompanying  coupons,  or  upon  which  there  is  due  the  above-described 
registered  interest,  and  that  under  the  provisions  of  the  Income  Tax  Law  and  Regulations  said  interest  is  exempt  from  having  the 
tax  withheld  at  the  source,  and  that  all  the  information  given  herein  is  true  and  correct. 


Date,  „,.,.„..,» s ..,,-lW 


Addre*:..., 

(Qlve  full  pos^offlce  address  of  firm  or  organliation.) 
Jtafe-Vfett  Bombers  ot  bond*  art  required  tt  be  gf /«,  Mme  are  to  be  entered  on  back  hereof. 


Revised  Form  1002, 

CERTIFICATE  FOR  USE  OF  FIRST  BANK  OR  COLLECTING 

AGENCY, 

shall  be  in  the  following  form,  and  shall  be  printed  on  green  paper : 


Form 
1002. 


Certificate  of  BANK  OB  COLLECTING  AGENCT. 
<t.  b*  arewaM  wllb  ctmpons  or  Interest  order,  whm  Ml  aec.mpa.kd  bj  certlflcat*  »'•*««*,) 


(Give  name  of  debtor.) 


(Full  deacriptlon  of  bonds,  giving  name  of  issue  and  Interest  rate.) 
,191    .  Amount  of  coupon  or  registered  interest,  $.. 


(Date  of  maturity  of  Interest.) 

I  (we)  do  solemnly  declare  that  the  bank  or  collecting  agency  named  below  has  purchased  or  accepted  for  collection  the 

accompanying  coupons  or  interest  orders  from ,  of 

(Name  of  party  from  whom  received.)  (Full  posU>fflce  addreu  of  said  party.) 

and  that  no  certificate  of  ownership  accompanied  said  coupons  or  interest  orders,  and  that  I  (we)  have  no  knowledge  as  to  who 
is  the  owner  or  owners  of  the  bonds  (except  as  noted  on  back  hereof )»  upon  which  the  above-described  interest  is  due,  and  the 
bank  or  collecting  agency  hereby  acknowledges  responsibility  of  withholding  therefrom  the  normal  income  tax  of  1  per  cent,  in 
accordance  with  the  regulations  of  the  Treasury  Department. 


(Bank  or  collecting  agency.) 

By 

(Signature  of  officer  authorized  to  sign  and  official  position.) 

(Full  'address  of  "bank'cV  withhoioUng  'agency'.) 

•  Nora.— If  the  ownership  of  bonds  Is  known  to  person  signing  this  certificate,  he  must  give  the  name  and  address  of  the  owner  on  the  back  hereof. 
(SIGNATURES  MUST  BE  CLEARLY  AND  LEGIBLY  WRITTEN.) 

Revised  Form  1004, 

Ownership  Certificate— NONRESIDENT  ALIENS, 
shall  be  in  the  following  form,  and  shall  be  printed  on  yellow  paper 

Ownership  Certificate— NONRESIDENT  ALIENS. 

(To  be  hralsbed  with  coupons  detached  from  bonds  or  other  obligations  owned  bj  citizens  or  subjects,  firms,  corporations,  or  < 
countries  and  who  are  not  residents  of  the  United  Slates.) 


„ , ,  191  Amount  of  coupon  or  registered  interest,  $ 

(Data  of  maturity  of  Interest.) 

1  do  solemnly  declare  that  the  owner  of  the  bonds  from  which  were  detached  the  accompanying  coupons,  or  upon  which 
there  matured  the  aforesaid  registered  interest,  is  a  nonresident  alien  in  respect  to  the  United  States,  and  is  exempt  from  the 
income  tax  imposed  on  such  income  by  the  United  States  Government  under  the  law  enacted  October  3, 1913;  that  no  citizen  of 
the  United  States  wherever  residing,  or  foreigner  residing  in  the  United  States  or  in  any  of  its  possessions,  has  any  interest  in 
said  bonds;  and  that  all  of  the  information  as  given  in  this  certificate  is  true  and  correct. 


Date, 


(Signature  of  owner  or,  if  organization,  name.) 

' ' '  "(If  organtea't  Ion ,~  signature'  of  "official"  authortted"  to  "sign",  "and"  official" 
position.) 


(FuU  post-office  address  i 

[.-When  numbers  of  bonds  an  required  to  be  given,  same  are  to  be  entered  on  back  hereof. 
(SIGNATURES  MUST  BE  CLEARLY  AND  LEOIBLY  WRITTEN.) 


TREASURY  DECISIONS 

Revised  Form  1007, 

CERTIFICATE  CLAIMING  EXEMPTION, 

allowed  citizens  and  resident  aliens*  under  paragraph  C,  shall  be  in 
the  following  form,  and  shall  be  printed  on  yellow  paper: 


EXEMPTION  CEBTIFICATI 

:  as  provided  In  p.r.£rtph  C  o 


>  Tu  Law  of  October  J,  1»I3.) 


eut  withholding  agent. 


(FuU  post-office  address.) 

I  hereby  serve  you  wltli  notice  tnat  I  am  single— married,  with  my  (wife— husband)  living 

with  me,  and  that  I  now  claim  the  benefit  of  the  exemption  of  $ ,  as  allowed 

In  paragraph  C  of  the  Federal  Income  Tax  Law  of  October  3,  1913  (my  .total  exemption  under 
said  paragraph  being  8 ). 


Date,  ,191 


Signed:  .... 
Address:  ... 


( Full  post-olnce  address.) 

the  debtor  or  withholding  agent  at  any  time,  not  less  than  30  days  prior  to  March  first  next 
ng  the  year  for  which  exemption  Is  claimed. 


AND  LEQIBLY  WRITTEN.) 


shall 

Form 
1015. 

ttorliMl. 


Revised  Form  1015, 

Ownership  Certificate— FIDUCIARY,  THE  SOURCE, 
be  in  the  following  form,  and  shall  be  printed  on  yellow  paper 

Ownership  Certificate— FIDUCIARY,  THE  SOURCE, 

(To  be  Hied  with  debtor  or  withholding  agents  by  fiduciaries  claiming  exemption  from  withholding  at  the  source.) 
(Give  uarae  of  debtor.) 


(FuU  description  of  bonds,  giving  i 


.., ,  191  Amount  of  coupon  or  registered  interest,  $ 

(Date  -of  maturity  ol  Interest.) 

I  (we)  do  solemnly  declare  that  the  estate  or  trust  named  below  is  the  owner  of  the  above-described  bonds  from  which  were 
detached  the  accompanying  coupon*,  or  upon  which  there  is  due  the  above-described  registered  interest,  and  acting  for  the  estate 
or  trust  in  the  capacity  herein  stated,  I  (we)  hereby  declare  that  I  (we)  do  now.  claim  exemption  from  having  the  normal 
tax  of  1  per  cent  withheld  from  said  income  by  the  debtor  at  the  source.  I  (we)  hereby  assume  the  duty  and  responsibility , 
imposed  upon  withholding  agents  under  the  law,  of  withholding  and  paying  the  income  tax  due,  for  which  I  (we)  may  be  liable. 


Date, 


(Xame  of  fiduciary.) 
for  ... 


(Nam.  of  estate  ort 


(Full  post-oincc  address.) 

s  of  bonds  arc  required  to  be  Riven,  same  are  to  be  entered  on  the  back  hereof. 
(SIGNATURES  MUST  BE  CLEARLY  AND  LEQIBLY  WRITTEN.) 


Revised  Form  1019, 

Certificate  of  Ownership— FIDUCIARY,  NOT  SOURCE, 
shall  be  in  the  following  form,  and  shall  be  printed  on  white  paper 


Form 
1019. 


g 

PS* 


S    5 
i 


Ownership  Certificate— FIDUCIARY,  NOT  SOURCE. 

(To  be  Bled  with  debtor  or  withholding  agent,  by  fldodariea  when  not  claiming  any  eiemptlon.  as  an  alternative  to  the  I 


(Full  description  at  bonds,  giving  name  of  issuo  and  interest  rule.) 

(i>ate'of'inatJr"itVofinwr«t) W1    '  Amount  of  coupon  or  registered  interest,  ?.... 

I  (we)  do  solemnly  declare  that  the  estate  or  trust  named  below  is  the  owner  of  the  above-described  bonds  from 
detached  the  accompanying  coupon*,  or  upon  which  there  is  due  the  above-described  n-sj istercd  interest,,  and  actiii"  f. 
or  trust  in  the  capacity  herein  stated,  I  (we)  hereby  declare  that  I  (we)  do  not  now  claim  exemption  from  having 
tax  of  1  per  cent  withheld  from  said  income  by  the  debtor  at  the  source. 


which  wore 
>rthecsl:ilu 
the  normal 


(1'upucity  In  xv Inch 
unto  of  csljteoi  trust.) 


numbers  of  bonds  are  required  to  be  given,  same  are  to  bo  entered  on  the  b.ick  !,. 
(SIGNATURES  MUST  bE  CLEARLY  AND  LEGIBLY  WRITTEN,) 


INCOME   TAX 


Form  1058, 

Substitute  Certificate— EXEMPTION   CLAIMED, 
shall  be  in  the  following  form,  and  shall  be  printed  on  yellow  paper 


Form 
1058. 


I 


K  P  f 

K 
Si' 


Substitute  Certificate-EXEMPTION  CLAIMED. 

Ibe  collecting  agent's  certificate  ta  substituted  for  the  certificate  of  owner  in  which  < 


(Full  description  of  bonds,  giv  s 
,191 


iV  of 'issue  and'i'riterest  rate!) ' 
Amount  of  coupon  < 


registered  interest,  ij 

(Date  of  maturity  of  Interest.) 

Total  exemption  allowed  under  paragraph  C,  $ Amount  of  exemption  claimed,  $ 

I  (we)  do  solemnly  declare  that  the  owner  of  the  above-described  bonds  from  which  were  detached  the  accompanying 

interest  coupons  has  filed  with  me  (us)  a  certificate  of  ownership,  Form  No. duly  executed  and  filled  in  according  to 

Treasury  Regulations,  which  certificate  has  been  indorsed  by  me  (us)  as  required  by  Treasury  Regulations,  aiid  that  under 
the  provisions  of  the  income  tax  law  and  regulations,  said  interest  is  exempt  from  the  withholding  and  payment  of  the  income 
tax  at  the  source,  or  that  exemption  was  claimed  as  stated  herein;  and  I  (we)  do  hereby  promise  and  pledge  myself  (ourselves) 
to  forward  the  said  certificate  to  the  Commissioner  of  Internal  Revenue  at  Washington,  D.  C.,  not  later  than  the  20th  day  of 
next  month,  in  accordance  with  Treasury  Regulations. 


101 


By.., 


(Name  of  bank  or  collecting  agenc-y.) 
'(signature  of  person  'authorized  to  sign"  aud'l'its  official' position.V 


(Full  post-uffico  address  of  collecting  t 


Form  1059, 

Substitute  Certificate— EXEMPTION  NOT  CLAIMED, 
shall  be  in  the  following  form,  and  shall  be  printed  on  white  paper 


I 

II. 


i' 


Substitute  Certlfleate-EXEMPTIOy  NOT  CLAIMED. 

m  when  collecting  agent's  certificate  Is  substituted  for  ccrtidcmte  of  owner  I:;  »  hlch  < 


(Full  description  of  bonds,  giving  name  01  Issue  ami  Interest  rate  ) 

,191  Amount  of  coupon  or  registered  interest,  $ 

(Da;  a  of  m&tci  Ity  of  Interest.) 
I  (we)  do  solemnly  declare  that  the  owner  cf  the  above-described  bonds  from  which  were  detached  the  accompanying 

coupons  has  filed  with  me  (us)  a  certificate  of  ownership,  Form  No duly  executed  and  fillc;!  ia  according  to  Treasury 

e  haa  been  indorsed  by  me  (us)  as  required  bv  Treasury  ReguiVuona,  and  which  <  .T!  'In viti-  did  not 

claim  any  exemption  from  having  the  normal  tax  of  1  per  cent  withheld  by  the  debtor  at  the  source;  and  I  (we)  do  hereby 
promise  and  pledge  myself  (ourselves)  to  forward  the  said  certificate  to  the  Comraisaioner  of  Internal  Revenue  at  Washington, 
D.  C.,  aoc  later  than  tuo  20ti  day  of  n«xt  month,  in  accordance  with  Treasury  Regulations. 


Date, 


By 


•  >[  bank  or  collecting  agency.) 

(8igiiature  •),  JICTSOII  authorized  to  sign,  end  his  offl'cial  position.) 
(Full  post-office  address  of  collecting  agency.) 


All  certificates  shall  be,  in  size,  8  by  3^  inches,  and  shall  be 
printed  to  read  from  left  to  right  along  the  8-inch  dimension. 

All  certificates  claiming  exemption  shall  be  printed  on  yellow 
paper;  all  certificates  not  claiming  exemption  shall  be  printed  on 
white  paper;  and  certificate  Form  1002,  for  use  by  the  first  bank 
or  collecting  agency,  shall  be  printed  on  green  paper. 

All  paper  upon  which  certificates  shall  be  printed  shall  correspond 
in  weight  and  texture  to  white  writing  paper  21  by  32,  about  40 
pounds  to  the  ream  of  500  sheets. 

Certificates  heretofore  authorized,  when  properly  executed,  will 
be  accepted  up  to  October  1,  1914. 

The  revised  certificates  hereby  provided  will  be  printed  by  the 
Government  and  furnished  without  cost  for  the  use  of  bond  owners. 

92 


TREASURY  DECISIONS 

All  existing  regulations  which  may  be  in  conflict  with  the  pre- 
scriptions of  this  regulation  are  hereby  superseded. 

Individuals  or  organizations  desiring  to  print  their  own  certifi- 
cates may  do  so,  but  certificates  so  printed  must  conform  in  size 
and  be  printed  in  similar  type,  upon  the  same  color,  shade,  and 
weight  of  paper  as  used  by  the  Government.* 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


(T.  D.  1977.) 

Ownership  certificate  to  be  executed  by  foreign  banks,  bankers,  etc.,  claiming 
exemption  of  nonresident  alien  from  income  tax  on  interest  on  bonds 
owned  by  said  nonresident  alien,  viz:  Citizens  or  subjects,  firms,  corpora- 
tions, or  organizations  of  foreign  countries  who  are  not  residents  of  the 
United  States. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.}  May  2,  1914. 

For  the  purpose  of  complying  with  income-tax  regulations  re- 
quiring the  filing  of  certificates  of  ownership  of  bonds  when  pre- 
senting coupons  or  interest  orders  for  collection  of  interest  on 
bonds  of  domestic  corporations  of  the  United  States  owned  by  non- 
resident aliens  as  to  the  United  States,  a  certificate  in  the  form 
following  is  provided,  which  may  be  executed  by  responsible  banks 
or  bankers  in  foreign  countries  for  and  in  behalf  of  nonresident 
alien  owners  of  bonds  of  United  States  corporations  : 


Form 


1060.  I     (For  use  by  forelsn  banks  or  bankers,  to  accompany  coupons  detacltod  from  bonds  or  other  obligations  owned  by  citizens  or  (objects,  firms,  corporations,  »r 
organizations  of  foreign  countries  and  who  are  not  residents  of  the  United  Wales.) 


2' 

I 


gl 

£«§ 


Ownership  Certlflcate-NONRESIDENT  ALIEN-TO  BE  EXECUTED  BY  BANES,  BANKERS,  ETC. 


(Full  description  of  bonds,  giving  name  of  issue  and 

191  Amount  of  coupon 

(uaio  01  maturity  01  interest.) 
I  (we)  do  solemnly  docbro  tha'.  the  owners  of  the  bo 
oglstercd  interest  are  nonresident  aliens  as  to  the  t 
•nment  under  the  law  enacted  October  3. 1913;  that  n 

any  time  within  three  years  from  the  date  of  this  oertiflcat 

Internal  J*eve^ue,CwStagtoV^^ 

further  agree  thai  whenever  in  the  Judgment  of  the  Commissioner  of  Internal  Revenue  It  shall  be  necessary  in  or  to  the  administration  of  the  Income  tax  law, 
f  th  bo  d  U?f°resaJdUeSt  ^  Comml3sloaer  °'  I""™31  Revenue,  dfccloso  and  furnish  to  him  the  names  and  addresses  of  the  owners  and  the  BmounU 


by  tot  Unltod  Stetta,  opon  preSntatlorTof  p?S5o°  th? TfSf  to m^usfbyTfroS, «  th?o$* Tf 
I  (we)  will  pay  and  remit  to  the  United  State  Government  the  amount  of  tax  claimed  to  be  doe; 


Date, 


(Name  of  bonk  or  banker.) 


By 

(Signature  of  official  authorized  to  sign.) 


When  foreign  banks  or  bankers  shall  use  the  foregoing  certifi- 
cate, they  may  include  in  one  certificate  all  the  coupons  from  bonds 
of  the  same  class  and  same  issue,  and  may  include  in  one  certifi- 
cate all  the  interest  orders  or  checks  for  interest  on  registered  bonds 
of  the  same  class  and  same  issue. 

The  above  certificate  shall*  be  in  size  8  by  3l/2  inches,  and  shall 
be  printed  to  read  from  left  to  right  along  the  8-inch  dimension. 

*Sample  certificates  showing  size  of  type  and  color  of  paper  can  be  secured 
from  collectors  of  internal  revenue  in  their  several  districts  or  from  the  Com- 
missioner of  Internal  Revenue  at  Washington,  D.  C. 

93 


INCOME   TAX 

The  certificate  shall  be  printed  on  yellow  paper  and  such  paper 
shall  correspond  in  weight  and  texture  to  white  writing  paper  21 
by  32,  about  40  pounds  to  the  ream  of  500  sheets. 

The  revised  certificate  hereby  authorized  will  be  printed  by  the 
Government  and  furnished  without  cost. 

Individuals  or  organizations  desiring  to  furnish  their  own  certifi- 
cates may  do  so,  but  certificates  so  printed  must  conform  in  size 
to  that  prescribed  above  and  be  printed  in  similar  type  upon  the 
same  color,  shade,  and  weight  of  paper  as  used  by  the  Government. 

Sample  certificates  showing  size  of  type  and  color  of  paper  can 
be  secured  from  collectors  of  internal  revenue  in  their  several  dis- 
tricts, or  from  the  Commissioner  of  Internal  Revenue,  Washing- 
ton, D.  C. 

W.   H.    OSBORN, 

Commissioner  of  Internal  Revenue. 


(T.  D.  1983.) 

Decision  of  Court. 

1.  CONSTITUTIONALITY. 

The  income  tax  law  is  not  unconstitutional. 

2.  INJUNCTION. 

As  the  taxes,  if  collected  illegally,  may  be  recovered  back,  there  is  no 
occasion  for  interference  of  a  court  of  equity  by  injunction. 

3.  DISMISSAL  OF  BILL. 

The  motion  for  injunction  was  overruled  and  the  bill  of  complaint  dis- 
missed with  costs. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  May  28,  1914. 

The  appended  decision  of  the  Supreme  Court  of  the  District  of 
Columbia  in  the  case  of  John  F.  Dodge  and  Horace  E.  Dodge,  v. 
William  H.  Osborn,  Commissioner  of  Internal  Revenue,  is  pub- 
lished for  the  information  of  internal-revenue  officers  and  others 
concerned. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


SUPREME   COURT   OF   THE   DISTRICT  OF   COLUMBIA    HOLDING   EQUITY    COURT. 

No.  32515. 

John  F.  Dodge  and  Horace  E.  Dodge,  plaintiffs,  v.  William  H.  Osborn,  Com- 
missioner of  Internal  Revenue,  defendant. 

[Decided  May  14,  1914.] 

STAFFORD,  Judge:  *  *  *  In  my  best  opinion  that  act  is  not  unconstitu- 
tional in  either  respect  in  which  it  is  challenged  by  the  plaintiffs.  I  think  the 
contentions  are  satisfactorily  met  and  answered  in  the  brief  filed  in  behalf  of 
the  Government,  so  that  I  will  not  take  the  trouble  to  write  an  opinion  in 
the  case  or  go  into  it  fully  at  this  time. 

******* 

The  plaintiffs  are  amply  able  to  pay  the  tax,  and  I  think  the  act  provides  a 
proper  and  reasonable  method  for  the  recovery  of  any  taxes  illegally  exacted 

94 


TREASURY  DECISIONS 

under  the  act.  The  defendant  is  proceeding  in  accordance  with  the  explicit 
directions  of  the  statute,  and  there  is  a  provision  that  if  the  taxes  are  collected 
illegally  they  may  be  recovered  back ;  and  inasmuch  as  no  irreparable  damage 
will  be  inflicted  upon  the  plaintiffs  by  the  payment  of  such  taxes,  even  if  ille- 
gal, and  subsequent  recovery  of  them  is  provided  for  by  the  statute,  I  think 
there  is  no  occasion  for  the  interference  of  a  court  of  equity  by  injunction.  I 
make  this  statement  because  the  same  question  may  arise  in  some  future 
case  with  reference  to  the  scope  and  effect  of  section  3224  of  the  Revised 
Statutes.  So  that  this  bill  will  be  dismissed  with  costs. 

NOTE. — Counsel  for  the  plaintiffs  noted  an  appeal  to  the  Court 
of  Appeals  of  the  District  of  Columbia. 


(T.  D.  198.V) 

Extension  to  October  31,  1914,  of  waiver  of  regulations  providing  for  the  fill- 
ing in  on  certificates  used  in  connection  with  the  income  tax  of  the  num- 
bers of  bonds  of  corporations,  etc. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  May  28,  1914. 

Notice  is  hereby  given  that  T.  D.'  1955,  issued  May  10,  1914, 
waiving  until  June  30,  1914,  the  requirement  that  the  numbers  of 
bonds  or  other  like  obligations  of  corporations,  etc.,  from  which 
interest  coupons  are  detached  or  upon  which  registered  interest  is 
to  be  paid,  shall  be  rilled  in  on  the  certificates  to  be  used  in  con- 
nection with  the  income  tax  is  hereby  extended  to  October  31,  1914. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


(T.  D.  1986.) 

Execution  of  income  tax  substitute-  certificates  1058  and  1059  by  banks  or 

collection  agents. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  May  29,  1914. 
To  collectors  of  internal  revenue: 

You  are  advised  that  as  a  convenience  to  banks  and  collecting 
agents  who  desire  to  substitute  their  certificates,  Forms  1058  and 
1059,  for  the  owner's  certificate  accompanying  the  coupons  de- 
posited for  collection,  it  is  hereby  provided  that  the  name  of  the 
bank  or  collecting  agent  may  be  printed  or  stamped,  and  that  a  fac- 
simile of  the  signature  of  the  person  authorized  to  sign  the  sub- 
stitute certificate  for  the  bank  or  collecting  agent  may  also  be 
printed  or  stamped  on  the  certificate  : 

Provided,  That  in  all  cases  the  bank  shall  first  file  with  the  Com- 
missioner of  Internal  Revenue  a  certificate  of  its  authorization  in 
substantially  the  form  following: 


INCOME    TAX 

'"(City.)"  "(Date'.)" 

The  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.   C. 

The  undersigned  hereby  authorizes  the  use  of  the  facsimile  signature  shown 
below  upon  all  substitute  income  tax  certificates  issued  in  its  name  until  this 
authorization  is  revoked  by  written  notice  to  you. 


(Name  of  bank  or  collecting  agent.) 

By 

(Signature  of  person  authorized  to  sign.) 


(Facsimile  signature  of  person  (Official  position.) 

authorized  to  sign.) 

W.  H.   OSBORN, 

Commissioner  of  Internal  Revenue. 


(T.  D.  1987.) 

Fiduciaries. 

Forms  1015  and  1019,  revised,  may  be  adapted  so  that  but  one  certificate  will 
be  required  to  be  filed  with  coupons  from  the  same  issue  of  bonds  the 
property  of  different  estates  or  trusts. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  May  29,  1914. 

To  collectors  of  internal  revenue: 

Under  Income  Tax  Regulations  No.  33,  articles  39  and  70,  fidu- 
ciaries are  required  to  file  certificates  on  Forms  1015  or  1019  (now 
1015  and  1019  revised),  according  to  the  nature  of  the  claim  to  be 
made  by  the  fiduciary,  for  each  issue  of  bonds  and  for  each  trust. 
-It  is  therefore  provided  that  where  fiduciaries  have  the  custody 
and  control  of  more  than  one  estate  or  trust,  and  said  estates  or 
trusts  have  as  assets  bonds  of  corporations,  etc.,  of  the  same  issue, 
said  fiduciaries  may  adapt  certificates,  Forms  1015  or  1019,  revised, 
by  changing  the  words  "estate  or  trust"  in  lines  1,  2,  and  3  of  said 
forms  to  the  plural,  and  writing  on  blank  line  provided  for  (the 
name  of  the  estate  or  trust)  the  words,  "As  noted  on  the  back 
hereof." 

In  such  cases  the  notation  on  the  back  of  the  certificate  should 
show  for  each  estate  or  trust — 

(a)  The  name  of  the  estate  or  trust. 

(fr)   The  amount  of  the  bonds. 

(c)   The  amount  of  the  interest. 

In  all  other  respects  the  certificates  should  be  filled  out  as  indi- 
cated thereon. 

W.  H.  OSBORN, 

Commissioner  of  Internal  Revenue. 
96 


TREASURY  DECISIONS 

(T.  D.  1988.) 

Certificate  of  ownership  of  bonds — nonresident  alien — (Form  1060)  provided 
to  be  executed  by  foreign  banks  or  bankers  may  be  used  by  domestic 
banks  or  bankers. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  June  2,  1914. 
To  collectors  of  internal  revenue: 

The  provisions  of  T.  D.  1977  permitting  responsible  banks  or 
bankers  of  foreign  countries  to  execute  certificates  of  ownership 
(Form  1060)  for  nonresident  alien  owners  of  bonds  of  domestic 
corporations  are  hereby  extended  to  and  for  the  use  of  responsible 
banks  or  bankers  in  the  United  States  for  and  in  behalf  of  non- 
resident alien  owners  of  bonds  of  United  States  corporations. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


(T.  D.  1989.) 

Designation  of  losses  which  are  deductible  from  gross  income  within  a  tax- 
able year. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  June  2,  1914. 
To  collectors  of  internal  revenue: 

Several  letters  have  been  received  in  which  inquiry  has  been 
made  as  to  whether  losses  resulting  from  the  sale  of  real  estate  by 
individuals  are  properly  deductible  from  gross  income  in  the  re- 
turns of  annual  net  income  of  individuals  for  the  income  tax. 

Under  paragraph  B  of  the  income  tax  law  it  is  provided  that 
among  the  deductions  to  be  allowed  shall  be  "losses  actually  sus- 
tained during  the  year  incurred  in  trade  or  arising  from  fires, 
storms,  or  shipwreck,  and  not  compensated  for  by  insurance  or 
otherwise." 

Losses  arising  from 'fires,  storms,  or  shipwreck  and  not  compen- 
sated for  by  insurance  or  otherwise  are  easily  ascertained  and 
there  would  not  appear  to  be  any  chance  of  an  erroneous  construc- 
tion as  to  these.  Losses  actually  sustained  during  the  year  in- 
curred in  trade  are  limited  by  the  language  of  the  act  itself. 

"In  trade"  is  synonymous  with  business. 

"Business"  has  been  defined  as  — 

That  which  occupies  and  engages  the  time,  attention,  and  labor  of  any  one 
for  the  purpose  of  livelihood,  profit,  or  improvement ;  that  which  is  his  per- 
sonal concern  or  interest  employment,  regular  occupation,  but  it  is  not  neces- 
sary that  it  should  be  his  sole  occupation  or  employment. 

The  doing  of  a  single  act  incidentally  or  of  necessity  not  per- 
taining to  the  particular  business  of  the  person  doing  the  same 
will  not  be  considered  engaging  in  or  carrying  on  the  business. 

It  is  therefore  held  that  no  losses  are  deductible  in  a  return  of 

97 


INCOME   TAX 

income  save  and  only  those  losses  permitted  and  provided  for  by 
the  statute,  viz.,  those  actually  sustained  during  the  year — 
Which  are  "incurred  in  trade," 

Or  which  arise  from  "fires,  storms,  or  shipwreck  and  not  com- 
pensated for  by  insurance  or  otherwise." 

W.  H.  OSBORN, 

Commissioner  of  Internal  Revenue. 
Approved : 

CHARLES  S.  HAMLIN,  - 

Acting  Secretary  of  the  Treasury. 


(T.  D.  1990.) 

Use  of  certified  checks  and  other  forms  of  commercial  exchange  in  payment 
of  internal-revenue  taxes. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  June  i,  1914. 

SIR  :  Your  letter  of  the  28th  ultimo  has  been  received,  in  which 
you  quote  a  letter  of  the  27th  idem,  addressed  to  you  by  the  presi- 
dent of  the  First  National  Bank  of  Abingdon,  calling  attention 
to  the  fact  that  you  are  receiving  from  taxpayers  in  payment  of 
income  tax  certified  checks  from  various  points  in  your  district. 
The  bank  requests  you  to  require  the  income  tax  to  be  paid  in 
New  York,  Washington,  Baltimore,  or  Philadelphia  funds  which 
can  be  used  in  New  York  at  par,  for  the  reason  that  they  are  re- 
quired to  remit  every  day  in  New  York  funds. 

You  call  attention  to  the  instructions  on  Form  647,  "Notice  of 
assessment  of  special  excise  and  income  tax,"  which  you  state 
instruct  taxpayers  that  they  may  remit  by  certified  check  and  that 
most  of  them  are  doing  so.  You  ask  what  steps  shall  be  taken 
by  you  in  case  the  bank  declines  to  accept  certified  checks  for 
deposit. 

In  reply  to  your  request  as  to  what  action  should  be  taken  in  case 
the  bank  declines  to  accept  certified  checks,  your  careful  attention 
is  invited  to  the  regulations  published  as  Department  Circular 
No.  11,  dated  March  27,  1913,  copy  inclosed.  You  will  note  that 
you  are  required  to  accept  in  payment  of  all  internal-revenue  taxes 
certified  checks  drawn  in  your  favor  on  national  and  State  banks 
and  trust  companies  located  in  the  city  of  Abingdon,  and  in  addi- 
tion such  "out  of  town"  certified  checks  as  you  can  cash  without 
cost  to  the  Government.  In  the  event  that  the  depositary  will  not 
accept  for  deposit  "out  of  town"  certified  checks,  you  are  not  re- 
quired by  law  or  regulations  to  accept  such  checks  in  payment  of 
internal-revenue  taxes. 

The  law  does  not  specifically  authorize  the  acceptance  of  any 
form  of  exchange  in  payment  of  internal-revenue  taxes  other  than 
currency  and  such  certified  checks  as  are  specifically  described  in 
Department  Circular  No.  11,  reference  to  which  is  made  above. 

98 


TREASURY  DECISIONS 

If,  however,  the  collector  elects  to  accept  drafts  or  other  mediums 
of  exchange  not  specifically  authorized  by  law,  he  does  so  at  his 
own  risk,  but  it  may  be  said  that,  if  the  depositary  bank  will  accept 
such  forms  of  exchange  indorsed  by  the  collector  without  recourse 
and  issue  therefor  regular  certificates  of  deposit,  the  monetary 
responsibility  would  appear  to  be  shifted  from  the  collector  to  the 
depositary,  inasmuch  as  the  collector  would  be  entitled  to  credit  in 
his  accounts  by  reason  of  the  issuance  of  such  certificates  of  deposit 
(see  sec.  3211,  Rev.  Stat,  and  notation  found  on  page  108  of  Com- 
pilation of  Internal  Revenue  Laws,  1911). 
Respectfully, 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 

COLLECTOR  OF  INTERNAL  REVENUE, 

Sixth  District,  Abingdon,  Va. 


(T.  D.  1992.) 

Bonds  of  foreign  corporations  payable,  as  to  interest,  wholly  within  the 
United  States,  or  within  or  without  the  United  States,  at  the  option  of 
the  owner  of  the  bonds,  to  be  treated  for  income-tax  purposes  as  domestic 
bonds  when  accompanied  by  certificates  of  ownership  properly  executed. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.}  June  4,  1914. 
To  collectors  of  internal  revenue:" 

Where  foreign  corporations  have  an  issue  of  bonds,  the  interest 
upon  which  is  payable  wholly  within  the  United  States,  or  within 
or  without  the  United  States,  at  the  option  of  the  owner  of  the 
bonds,  in  all  cases  where  said  foreign  corporations  have  fiscal 
agents  within  the  United  States  and  the  said  bonds  are  owned  by 
citizens  of  the  United  States  or  aliens  resident  within  the  United 
States,  the  collection  of  interest  on  said  bonds  shall  be  considered 
to  be  and  treated  as  a  domestic  transaction  upon  the  filing  with 
said  coupons  certificates  of  ownership  properly  executed: 

Provided,  That  whenever  coupons  from  foreign  bonds  not  ac- 
companied by  certificates  of  ownership  are  presented  for  collection 
they  shall  be  treated  as  foreign  items,  and  the  first  bank  or  collect- 
ing agency  receiving  or  accepting  the  same  for  collection  or  other- 
wise shall  deduct,  withhold,  and  pay  the  tax  as  provided  by  in- 
come-tax regulations  for  the  collection  of  foreign  income. 

Where  a  foreign  corporation  has  an  issue  of  registered  bonds,  the 
interest  on  which  is  payable  through  a  fiscal  agent  in  the  United 
States,  certificates  of  exemption  may  be  filed  with  said  fiscal  agent 
in  manner  and  form  as  prescribed  by  T.  D.  1974  and  payment  by 
said  fiscal  agent  shall  be  made  in  accordance  with  the  provisions 
of  T.  D.  1974. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 

99 


•    INCOME    TAX 

(T.  D.  1993.) 

Income  Ta.r. 

Interest  paid  on  indebtedness  wholly  secured  by  collateral  the  subject  of  sale 
in  the  ordinary  business  of  a  corporation  may  be  deducted  as  a  part  of  its 
expense  of  doing  business. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  June  5,  1914. 
To  collectors  of  internal  revenue: 

This  office  is  in  receipt  of  numerous  letters  asking  a  ruling  of 
this  office  as  to  the  application  of  the  following  proviso  quoted 
from  subdivision  (b)  of  subsection  G  of  section  2,  act  of  Congress 
approved  October  3,  1913,  to-wit: 

Provided,  That  in  the  case  of  indebtedness  wholly  secured  by  collateral  the 
subject  of  sale  in  the  ordinary  business  of  such  corporation,  joint-stock  com- 
pany or  association,  the  total  interest  secured  and  paid  by  such  company, 
corporation,  or  association,  within  the  year  on  any  such  indebtedness  may  be 
deducted  as  a  part  of  its  expense  of  doing  business. 

Many  of  these  inquiries  come  from  corporations  engaged  in  buy- 
ing and  selling  real  estate,  which  real  estate  is  pledged  for  the 
payment  of  indebtedness,  and  the  question  submitted  is  whether 
or  not  such  real  estate  is  "collateral"  within  the  meaning  of  the 
proviso  quoted  and  whether  or  not  corporations  paying  interest 
on  indebtedness  wholly  secured  by  such  collateral  may  deduct  from 
gross  income  as  "an  expense  of  doing  business"  the  amount  of  in- 
terest paid  on  such  indebtedness^ 

Relative  to  this  you  are  informed  that  "collateral,"  as  used  in 
this  proviso,  comprehends  and  includes  real  estate  or  any  form  of 
physical  or  tangible  property  bound  for  the  performance  of  certain 
covenants,  the  payment  of  certain  obligations,  and  if  such  real 
estate  or  other  physical  or  tangible  property  is  the  "subject  of  sale 
in  the  ordinary  business  of  the  corporation"  owning  the  same,  that 
is,  if  such  corporation  is,  as  a  matter  of  its  ordinary  business,  en- 
gaged in  buying  and  selling,  or  dealing  in  such  property,  the  in- 
terest actually  paid  within  the  year  on  indebtedness  wholly  secured 
by  such  collateral  (a  mortgage  on  such  property)  may  be  allowably 
deducted  from  gross  income  under  item  4  (a)  of  the  return  form 
as  an  expense  of  doing  business,  without  regard  to  the  limit  of 
deductible  interest  as  set  out  in  subdivision  "Third,"  paragraph  (b), 
subsection  G  of  the  Federal  income  tax  law  hereinbefore  cited. 

This  construction  of  the  proviso  quoted  is  not  intended  to  and 
does  not  authorize  the  deduction  as  "an  expense  of  doing  business" 
of  any  interest  paid  or  indebtedness  secured  by  property,  real  or 
personal,  which  is  not  the  "subject  of  sale  in  the  ordinary  business 
of  the  corporation,"  but  which  is  held  by  it  for  the  purpose  of,  or  as 
an  instrument  in  carrying  on,  its  ordinary  business — such  as  the 
rights  of  way  and  other  property  of  public  utility  companies,  per- 
manent office  buildings  and  property  of  like  character  held  or  occu- 
pied for  their  own  particular  use  or  purpose  in  the  furtherance  of 
the  objects  of  the  corporation,  but  which  property  is  not  the  sub- 

100 


TREASURY  DECISIONS- -J 

ject  of  sale  in  their  ordinary  business,  and -which  is  simply  occupied 
or  used  as  an  instrument  or  means  of,  or  essential  to,  the  carrying 
on  of  the  ordinary  business  for  the  transaction  of  which  they"  are 
organized.  The  fact  that  such  property  may  be  subject  to  sale 
under  extraordinary  or  peculiar  conditions  does  not  qualify,  but 
father  disqualifies,  it  as  "collateral"  such  as  is  contemplated  by 
this  provision  of  the  act  cited. 

The  only  corporations,  joint-stock  companies,  or  associations 
which  will  be  allowed  under  this  proviso  as  herein  interpreted  to 
deduct  as  "an  expense  of  doing  business"  interest  paid  on  indebted- 
ness wholly  secured  by  mortgage  on  real  estate,  or  other  physical 
and  tangible  property,  are  those  corporations,  joint-stock  com- 
panies, or  associations  which  are  organized  and  operated  for  the 
exclusive  purpose  of  buying,  selling,  and  dealing  in  the  particular 
kind  of  property  upon  which  the  mortgage  is  given,  and  the  par- 
ticular property  pledged  for  the  debt  upon  which  the  interest  is 
paid  must  be  the  "subject  of  sale  in  the  ordinary  business  of  the 
corporation." 

Any  corporation  whose  indebtedness  is  secured  by  a  trust,  mort- 
gage, or  by  any  form  of  indenture  which  covers  and  includes  in  the 
lien  any  property  which  is  not  the  subject  of  sale  in  the  ordinary 
business  of  such  corporation,  will  be  and  is  excluded  from  the 
benefit  of  this  proviso,  as  hereinbefore  construed,  and  its  interest 
deduction  will  be  limited  to  the  amount  authorized  in  subdivision 
"third"  above  referred  to — that  is,  the  interest  actually  paid  within 
the  year  at  the  contract  rate  on  an  amount  of  bonded  or  other  in- 
debtedness at  no  time  within  the  year  in  excess  of  a  sum  ascertained 
by  adding  to  the  paid-up  capital  stock  outstanding  at  the  close  of 
the  year  one-half  of  the  total  amount  of  the  interest-bearing  in- 
debtedness also  then  outstanding. 

Corporations  which  under  this  ruling  are  entitled  to  deduct  as 
"an  expense  of  doing  business"  the  total  amount  of  interest  paid 
within  the  year  on  "indebtedness  wholly  secured  by  collateral  the 
subject  of  sale  in  the  ordinary  business  of  such  corporations,"  are 
required  to  state  separately  in  their  returns  the  amount  of  indebt- 
edness upon  which  such  interest  is  paid,  segregating  it  from  the 
indebtedness  not  so  secured  and  upon  which  the  interest  paid  is 
taken  credit  for  or  deducted  under  item  6  (a)  of  the  return  form. 
The  interest-bearing  indebtedness  stated  under  item  2  of  the  return 
form  as  one  of  the  bases  for  determining  the  amount  of  interest 
which  may  be  allowably  deducted  under  item  6  (a)  must  not  in- 
clude any  "indebtedness  wholly  secured  by  collateral  the  subject 
of  sale  in  the  ordinary  business  of  the  corporation."  Failure  to  seg- 
regate the  two  forms  of  indebtedness  will  render  the  interest  de- 
duction under  item  6  (a)  subject  to  suspension  and  disallowance. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


INCOME   TAX 

(T.  D.  1996.) 

Cooperative  dairies  and  like  organizations  do  not  fall  within  the  classes  of 
organizations  enumerated  in  subsection  G,  section  2,  act  of  October  3, 
1913,  as  exempt,  and  are  required  to  make  returns  of  annual  net  income. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  June  15,  1914* 
To  collectors  of  internal  revenue: 

Attention  is  called  to  article  92  of  Regulations  No.  33,  approved 
January  5,  1914,  in  which  it  is  provided  that  cooperative  dairies  not 
issuing  stock  and  allowing  patrons  dividends  based  on  the  percent- 
age of  butter  fat  in  milk  furnished  are  not  liable  to  the  require- 
ments of  section  2,  act  of  October  3,  1913. 

This*  article  is  amended  to  the  effect  that  cooperative  dairy  asso- 
ciations, whether  issuing  capital  stock  or  not,  are  required  to  make 
returns  of  annual  net  income  pursuant  to  the  requirements  of  this 
act. 

The  only  corporations,  joint-stock  companies  or  associations,  or 
insurance  companies,  exempt  from  the  requirements  of  this  act  are 
those  which  fall  within  one  or  another  of  the  classes  specifically 
enumerated  in  the  first  proviso  of  subsection  G  of  the  act  cited  as 
exempt. 

Cooperative  dairies,  no  matter  how  organized,  do  not  appear  to 
fall  within  any  of  these  exempted  classes,  and  will,  therefore,  be 
required  to  make  returns. 

In  the  preparation  of  their  returns,  cooperative  dairies  may  in- 
clude in  their  deductions  from  gross  income  the  amount  actually 
paid  to  members  and  patrons  for  milk,  but  any  amount  retained  at 
the  end  of  the  year  over  and  above  expenditures  will  be  returned  as 
net  income,  upon  which  the  tax  will  be  computed  and  assessed. 

In  so  far  as  article  92,  hereinbefore  referred  to,  is  in  conflict 
with  this  ruling,  it  is  hereby  revoked,  and  collectors  will  require  all 
organizations  of  this  character  to  make  returns  of  annual  net  in- 
come and  in  other  respects  comply  with  the  requirements  of  the 
Federal  income  tax  law  as  it  applies  to  corporations,  joint-stock 
companies  or  associations,  and  insurance  companies. 

In  so  far  as  applicable,  this  ruling  also  applies  to  mutual  or  co- 
operative telephone  companies,  farmers'  insurance  companies,  and 
like  organizations. 

W.   H.   OSBORN, 
Commissioner  of  Internal  Revenue. 


(T.  D.  1997.) 

Monthly  list  returns  not  to  be  made  under  oath. 
TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.}  June  16,  1914. 
To  collectors  of  internal  revenue: 
The  requirement  that  monthly  list  returns  be  made  under  oath 

102 


TREASURY  DECISIONS 

(as  provided  by  articles  35,  50,  53,  and  59,  Income  Tax  Regula- 
tions No.  33,  when  filed  by  withholding  agents  on  or  before  the 
20th  of  the  month  following  that  in  which  withholding  occurred) 
is  hereby  waived. 

In  all  cases  the  annual  list  return  required  of  withholding  agents 
(of  which  the  monthly  list  returns  will  form  a  part  as  required  by 
regulations)  will  be  made,  sworn  to,  and  filed  as  now  required  by 
existing  regulations,  and  the  jurat  for  the  annual  list  return  will 
cover  the  entire  return  as  thus  made  up. 

W.   H.   OSBORN, 
Commissioner  of  Internal  Revenue. 


(T  .D.  1998.) 

Exemption  certificate  provided  for  use  of  firms,  organizations,  and  fiduciaries 
claiming  exemption  from  withholding  of  tax  at  source  on  income  other 
than  interest  on  bonds. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  June  16,  1914. 
To  collectors  of  internal  revenue: 

The  following  certificate  is  hereby  provided  for  use  of  firms, 
organizations,  and  fiduciaries  for  the  purpose  of  establishing  their 
identity  and  nonliability  to  withholding  at  the  source  of  income 
(other  than  interest  on  bonds)  payable  to  them.  Said  certificates 
shall  be  of  the  size  and  be  printed  on  yellow  paper  of  the  weight 
and  texture  all  as  provided  by  T.  D.  1976,  the  requirements  of 
which  are  hereby  made  applicable  to  the  certificate  hereby  pro- 
vided. 


Form 
1063. 


Exemption  Certificate— FIRMS,  ORGANIZATIONS,  OR  FIDUCIARIES. 

withholding  •<  Uie  source.) 


(Character  of  Income,  otber  than  Interest  on  bonds,  as,  rent,  dividend]  trom  foreign  corporations,  etc. ) 

I  do  solemnly  declare  that  the  firm,  organization,  or  person  named  below  is, entitled  to  receive  the  above-described  Income, 
and  that  under  the  provisions  of  the  income  tax  law  and  regulations  aaid  income  is  exempt  from  having  the  tax  Mrithheld  at  the 
source,  and  that  all  the  information  given  herein  is  true  and  correct. 


Date, 191 


r 


(Name  of  firm,  organHatloo,  or  Cdoctary.) 


(Give  full  post-office  address  of  firm  or  organisation  or  fiduciary.) 


The  exemption  certificate  provided  for  the  use  of  individuals  is 
Form  1007,  w1  'ch  will  be  use  by  individuals  in  all  cases  except 
for  interest  on  bonds,  for  which  forms  1000  and  1000B  are  pro- 
vided. 

W.   H.   OSBORN, 

Commissioner  of  Internal  Revenue. 
103 


(T.  D.  2001.) 

Corporations  desiring  to  make  returns  of  annual  net  income  on  the  basis  of 
a  fiscal  year  must  give  notice  in  writing  to  the  collector  not  less  than  30 
days  prior  to  March  1,  designating  in  such  notice  the  last  day  of  some 
month  as  the  close  of  the  fiscal  year.  Failure  to  give  such  notice  at  least 
30  days  prior  to  March  1,  or  to  make  return  for  the  preceding  calendar 
year  on  or  before  March  1,  renders  corporations  liable  to  additional  tax 
and  penalty. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  June  22,  1914 
To  collectors  of  internal  revenue: 

Your  attention  is  called  to  the  following  provision  quoted  from 
paragraph  O,  subsection  G  of  section  2,  act  of  October  3,  1913 : 

The  tax  herein  imposed  .shall  be  computed  upon  its  entire  net  income  ac- 
crued within  each  preceding  calendar  year  ending  December  thirty-first ; 
*  *  *  Provided  further,  That  any  corporation,  etc.,  subject  to  this  tax  may 
designate  the  last  day  of  any  month  in  th'e  year  as  the  day  of  closing  of 
its  fiscal  year  arid  shall  be  entitled  to  have  the  tax  payable  by  it  computed 
upon  the  basis  of  the  net  income  ascertained  as  herein  provided  for  the  year 
ending  on  the  day  so  designated  *  *  *  and  it  shall  give  notice  of  the  day 
it  has  thus  designated  as  the  closing  of  the  fiscal  year  to  the  collector  of  the 
district  in  which  its  principal  business  office  is  located  at  any  time  not  less 
than  thirty  days  prior  to  the  date  upon  which  its  annual  return  shall  be  filed. 

Except  as  provided  in  the  act,  all  corporations  are  required  to 
make  their  returns  of  annual  net  income  on  the  basis  of  the 
calendar  year  and  to  file  such  returns  on  or  before  the  1st  day  of 
March  next  following.  March  1  is,  therefore,  the  primary  due 
date  for  the  returns  of  all  corporations.  This  due  date  can  be 
postponed  only  in  accordance  with  some  legal  or  authorized 
action.  Unless  such  action  is  taken  within  the  prescribed  time, 
or  the  returns  filed  on  or  before  March  1,  all  corporations  in 
•existence  at  the  preceding  December  31  and  failing  to  take  such 
action,  or  so  file  their  returns  for  the  period  ended  December 
3.1,  will  be  held  to  be  delinquent,  and  will  be  subject  to  50  per 
cent  additional  tax  and  the  penalty  of  the  law. 

The  filing  of  returns  at  any  date  other  than  on  or  before  March 
1  and  on  a  basis  other  than  the  calendar  year  can  be  authorized 
only  in  cases  wherein  corporations,  not  less  than  30  days  prior 
to  March  1,  give  notice  in  writing  to  the  collector  of  the  district 
in  which  are  located  their  principal  places  of  business,  designat- 
ing in  such  notice  the  last  day  of  some  month  as  the  close  of  their 
fiscal  year.  In  this  case  the  corporations  will  make  their  returns 
for  the  year  so  established,  and  will  file  their  returns  on  or  before 
the  last  day  of  the  60-day  period  next  following  the  date  desig- 
nated as  the  close  of  the  fiscal  year. 

For  the  purpose  of  the  income  tax  law,  a  fiscal  year,  when 
designated,  must  be  so  designated  that  the  return  made  on  this 
basis  will  not  comprehend  a  period  greater  than  12  consecutive 
months.  If  the  required  notice  is  delayed  until  it  can  not  be 
given  at  least  30  days  prior  to  March  1,  or  if  the  date  designated 
as  the  close  of  the  fiscal  year  comprehends  a  period  greater  than 

104 


TREASURY  DECISIONS 

12  months  from  the  close  of  the  period  for  which  the  last  prior 
return  was  made,  the  returns  must  be  made  as  of  the  calendar 
year  and  must  be  filed  on  or  before  March  1  until  such  time  as  a 
fiscal  year  for  this  purpose  can  be  legally  established. 

If  a  corporation  which  shall  have  filed,  on  or  before  March  1, 
its  return  for  the  preceding  period  ended  December  31,  desires 
to  estabish,  as  a  basis  for  making  future  returns,  a  fiscal  year 
ended  at  some  date  prior  to  the  next  December  31,  it  may  do  so 
by  filing,  at  least  30  days  prior  to  the  date  when  its  returns,  on  a 
fiscal  year  basis,  will  be  due,  a  notice  with  the  collector  desig- 
nating the  last  day  of  some  month  as  the  close  of  its  fiscal  year. 
It  will  then,  on  or  before  the  last  day  of  the  60-day  period  next 
following  the  date  so  designated,  file  a  return  covering  the 
period  from  January  1  to  the  date  so  designated  in  the  same 
year,  and  thereafter  its  returns  will  be  made  for  each  12-month 
period  next  following  such  date. 

The  above  rulings  will  apply  to  corporations  which  began  busi- 
ness within  the  year,  as  well  as  to  those  which  were  in  existence 
and  transacted  business  throughout  the  year. 

Any  ruling  or  Treasury  decision  heretofore  issued  and  in  con- 
flict with  this  decision  is  hereby  recalled  and  revoked. 

W.   H.    OSBORN, 

Commissioner  of  Internal  Revenue. 


(T.  D.  2005.) 

Instructions  and  rules  for  determining  what  amount  is  to  be  allowed  as  a  de- 
duction for  loss  in  a  return  of  income. — Depreciation  allowed  by  law  does 
not  include  shrinkage  in  value  of  stocks,  bonds,  etc. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  July  8,  1914. 
To  collectors  of  internal  revenue  and  revenue  agents: 

For  the  purpose  of  checking  up  returns  and  ascertaining  the 
amount  of  taxable  income  of  individuals  and  corporations  you  are 
given  the  following  instructions  and  rules  for  use  in  determining 
the  amount  of  deductible  loss  allowable  to  individuals  and  corpo- 
rations under  the  fourth  deduction  (par.  B,  p.  5),  Regulations  No. 
33,  and  second  deduction,  for  domestic  corporations  (par.  G,  p. 
14),  and  second  deduction,  for  foreign  corporations  (par.  G,  p.  15), 
Regulations  No.  33. 

The  loss  considered  here  has  in  it  no  element  of  "depreciation," 
or  "allowance  for  wear  and  tear,"  or  "compensation  from  insurance 
or  otherwise."  It  is  to  be  such  loss  as  is  absolute  and  complete  and 
which  has  been  actually  sustained. 

Depreciation  as  an  allowable  deduction  in  ascertaining  annual 
net  income  for  the  income  tax  is  separately  provided  for  and  is  not 
to  be  confused  with  loss.  The  depreciation  provided  to  be  taken 
as  a  deduction  in  a  return  of  income  is  the  value  assigned  to  the 
deterioration  of  physical  improvements  or  assets,  such  as  are  sus- 

105 


INCOME   TAX 

ceptible  of  having  their  value  lessened  through  wear  and  tear,  use 
or  obsolescence. 

The  depreciation  referred  to  in  the  income-tax  law  does  not  re- 
late to  evidence  of  a  right  or  interest  in  property,  and  hence  any 
shrinkage  in  the  value  of  bonds,  stocks,  and  like  securities  due  to 
fluctuations  in  their  market  value  is  not  deductible  in  a  return  of 
income  as  depreciation  or  loss. 

Losses  may  be  sustained  by  individuals  or  corporations  on  per- 
sonal or  real  property.  Only  those  losses  are  deductible  which  are 
sustained  during  the  tax  year  "in  trade" — that  is,  the  business  which 
engages  the  time,  attention,  and  labor  of  anyone  for  the  purpose  of 
livelihood,  profit,  or  improvement.  Loss  to  be  deductible  must  be 
an  absolute  loss,  not  a  speculative  or  fluctuating  valuation  of  con- 
tinuing investment,  but  must  be  an  actual  loss,  actually  sustained 
and  ascertained  during  the  tax  year  for  which  the  deduction  is 
sought  to  be  made ;  it  must  be  incurred  in  trade  and  be  determined 
and  ascertained  upon  an  actual,  a  completed,  a  closed  transaction. 

Losses  sustained  by  individuals  or  corporations  from  the  sale 
of  or  dealings  in  personal  or  real-  property  growing  out  of  owner- 
ship or  use  of  or  interest  in  such  property  will  not  be  deductible  at 
all  unless  they  are  an  incident  of,  connected  with,  and  grow  out  of 
the  business  of  the  individual  or  corporation  sustaining  the  loss,  and 
are  ascertained,  determined,  and  fixed  as  absolute  in  the  above 
sense  within  the  taxable  year  in  which  the  deduction  is  sought  to 
be  made.  When  loss  under  this  heading  is  ascertained  to  be  de- 
ductible, the  entire  amount  of  the  loss  will  be  deductible  except 
where  the  property  in  connection  with  which  the  loss  occurred  was 
acquired  prior  to  March  1,  1913,  in  the  case  of  individuals,  and 
prior  to  January  1,  1909,  in  the  case  of  corporations,  and  then  and  in 
such  event  the  loss  ascertained  will  be  prorated  over  the  whole  time 
the  property  was  held,  and  that  part  of  the  whole  loss  apportioned 
to  the  taxable  period  will  be  taken  into  account  in  annual  returns 
of  income.  In  prorating,  fractional  parts  of  years  will  not  be  con- 
sidered. 

Loss  is  the  difference  between  selling  price  and  cost  where  the 
selling  price  is  less  than  cost. 

Cost  of  property  purchased  prior  to  the  incidence  of  the  special 
excise  tax  (Jan.  1,  1909),  or  the  incidence  of  the  income  tax 
(Mar.  1,  1913),  will  be  the  actual  price  paid  for  the  property,  in- 
cluding the  expense  incident  to  the  procurement  of  the  property  in 
the  first  instance  and  its  sale  thereafter,  together  with  carrying 
charges  of  interest,  insurance  and  taxes  actually  paid  prior  to  the 
incidence  of  tax  (special  assessments,  if  any,  "actually  paid"  as 
"local  benefits"  in  connection  with  real  estate)  ;  provided  that 
where,  up  to  the  incidence  of  the  tax,  the  expense  of  carrying  prop- 
erty has  exceeded  the  income  from  it,  the  difference  between  the 
expense  of  carrying  ?.nd  the  income  from  the  property  shall  be 
added  to  the  purchase  price  and  the  sum  thus  ascertained  shall  be 
the  cost  of  the  property;  and  provided  further,  that  in  the  case  of 
property  purchased  prior  to  the  incidence  of  the  tax  and  sale 

106 


TREASURY  DECISIONS 

thereof  subsequent  to  the  incidence  of  the  tax  there  shall  be  ex- 
cluded from  consideration  in  ascertaining  cost  any  items  of  income, 
expense,  interest,  and  taxes  previously  taken  into  account  in  pre- 
paring a  return  of  annual  net  income. 

The  cost  of  property  acquired  subsequent  to  the  incidence  of 
the  tax  will  be  the  actual  price  paid  for  it,  together  with  the  ex- 
pense incident  to  the  procurement  of  the  property  in  the  first 
instance  and  its  sale  thereafter  and  the  cost  of  improvement  or 
development,  if  any. 

All  existing  rulings  and  regulations  in  conflict  herewith  are 
hereby  annulled  and  superseded. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


(T.  D.  2006.) 

Definition  of  "foreign  corporation"  and  "fiscal  agent"  as  used  in  T.  D.  1992, 
and  further  explanation  of  method  of  handling  collection  _of  income  from 
bonds  of  such  foreign  corporations  and  foreign  countries  having  fiscal 
agents  in  the  United  States. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  July  16,  1914. 

To  collectors  of  internal  revenue: 

Doubt  having  arisen  as  to  the  comprehensiveness  of  the  term 
"foreign  corporation,"  and  the  duties  under  the  income-tax  law 
of  "fiscal  agents,"  as  provided  in  T.  D.  1992,  you  are  advised  that 
"foreign  corporations"  as  used  in  said  decision  was  intended  to 
include  municipal  and  private  corporations  holding  charters 
under  laws  of  countries  foreign  to  the  United  States,  and  "fiscal 
agents"  refers  to  financial  agents  in  the  ordinary  sense,  upon 
whom  the  law  casts  the  same  duties  with  reference  to  with- 
holding and  paying  the  tax  as  are  imposed  upon  withholding 
and  paying  agents  of  domestic  corporations  by  appointment. 

Where  a  foreign  government  has  a  fiscal  agent  in  the  United 
States  for  the  purpose  of  paying  the  interest  on  its  obligations, 
such  fiscal  agent  will  be  charged  with  the  duty  of  withholding 
and  paying  the  tax  on  such  interest  payments,  except  to  the  ex- 
tent of  exemption  claimed. 

Where  such  foreign  countries  or  corporations  have  an  issue  of 
bonds  payable  wholly  within  the  United  States  or  within  or 
without  the  United  States,  at  the  option  of  the  owner  of  the 
bonds,  and  where  the  coupons  from  such  bonds  are  presented  for 
payment  to  the  fiscal  agent  in  the  United  States  of  such  foreign 
countries  or  corporations,  or  for  collection  to  a  bank  or  collecting 
agency  whether  licensed  or  not,  with  ownership  certificate  at- 
tached, then  and  in  all  such  cases  said  coupons  shall  be  treated  as 
domestic  items  and  the  aforesaid  fiscal  agents  will  be  charged 
with  the  duties  and  responsibilities  of  withholding  and  paying 
agents,  and  will  make  return  on  Form  1012,  as  provided  by  in- 
come tax  regulations. 

107 


INCOME   TAX 

Where,  however,  such  coupons  are  not  presented  with  such 
ownership  certificates  attached,  they  shall  be  received  only  by  a 
licensed  bank  or  collecting  agency,  and  when  so  received  shall 
be  considered  to  be  and  be  treated  as  foreign  items,  in  accordance 
with  the  regulations  for  the  collection  of  foreign  income. 

This  ruling  is  made  in  explanation  and  amendment  of  T.  D. 
1992  and  other  applicable  regulations. 

W.   H.  OSBORN, 

Commissioner  of  Internal  Revenue. 


(T.  D.  2011.) 

Taxability  of  commissions  on  renewal  premiums  on  insurance. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  July  28,  19/4. 
To  collectors  of  internal  revenue: 

Commissions  on  renewal  premiums  for  insurance  are  income 
when  received  and  income  for  the  period  in  which  received. 
Therefore,  commissions  on  renewal  premiums  received  between 
March  1  and  December  31,  1913,  are  taxable  income  for  that 
period  and  should  be  included  in  returns  of  income  for  1913. 

Where  commissions  on  renewal  premiums  received  by  indi- 
viduals between  March  1  and  December  31,  1913  (including  com- 
missions on  renewal  premiums  on  business  written  prior  to 
March  1,  1913,  and  payable  and  paid  subsequent  to  that  date) 
were  not  included  in  returns  of  income  of  such  individuals  for 
1913,  they  should  file  amended  returns  and  include  in  such 
amended  returns  the  amount  of  said  commissions  on  renewal 
premiums. 

Where  returns  of  annual  net  income  were  not  made  by  indi- 
viduals in  receipt  of  commissions  on  renewal  premiums  because 
of  insufficient  income  to  require  a  return  of  income,  and  such 
showing  of  insufficient  income  was  caused  by  the  exclusion  from 
the  return  of  said  commissions  on  renewal  premiums,  such  indi- 
viduals should  make  and  file  returns  of  income  and  include  there- 
in the  commissions  received  by  them  on  renewal  premiums  within 
the  period  from  March  1  to  December  31,  1913. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


(T.  D.  2012.) 

Extending  exemption  certificate  No.  1063,  as  prescribed  in  T.  D.  1998,  to  non- 
resident alien  individuals. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  July  50,  1914. 
To  collectors  of  internal  revenue: 

Exemption  certificate  1063,  as  provided  in  T.  D.  1998,  is  hereby 
extended  to  and  made  applicable  to  the  use  of  persons  who  are 

108 


TREASURY  DECISIONS 

non-resident  aliens  in  claiming  exemption  from  income  tax  on 
dividends  payable  in  the  United  States  from  stock  of  foreign 
corporations, 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


(T.  D.  2013.) 

Nonresident  aliens — Amendment  of  article  8  of  Regulations  33,  providing  for 
the  collection  of  tax  on  income  of  nonresident  aliens  derived  from  trades 
or  professions  in  the  United  States. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  August  12,  1914. 
To  collectors  of  internal  revenue: 

Article  8,  Income  Tax  Regulations  33,  is  hereby  amended  by 
adding  thereto  the  following : 

The  person,  firm,  company,  copartnership,  corporation,  joint-stock  company 
or  association,  and  insurance  company  in  the  United  States — citizen  or  resi- 
dent alien — in  whatever  capacity  acting,  having  the  control,  receipt,  disposal, 
or  payment  of  fixed  or  determinable  annual  or  periodical  gains,  profits,  and 
income,  of  whatever  kind,  to  a  nonresident  alien,  under  any  contract  or  other- 
wise, and  which  payment  shall  represent  income  of  a  nonresident  alien  from 
the  exercise  of  any  trade  or  profession  within  the  United  States,  shall  make 
return  for  such  nonresident  alien  on  Form  1040  and  shall  pay  any  and  all  tax 
— normal  and  additional  tax — chargeable  upon  the  said  income  of  such  non- 
resident alien. 

So  that  article  8  as  amended  shall  read : 

ART.  8.  The  income  of  nonresident  aliens  subject  to  the  normal  tax  of  1 
per  cent  shall  consist  of  the  total  gains,  profits,  and  income  derived  from  all 
property  owned  and  from  every  business,  trade,  or  profession  carried  on 
within  the  United  States  (to  be  designated  as  gross  income),  less  deductions 
(1  to  8,  inclusive)  specifically  enumerated  in  paragraph  B  of  the  act  (see  art. 
6),  in  so  far  as  said  deductions  relate  to  said  gains,  profits,  etc. 

The  specific  exemption  in  paragraph  C  of  the  act  can  not  be  allowed  as  a 
deduction  in  computing  the  normal  tax  of  nonresident  aliens. 

Nonresident  aliens  are  subject  to  additional  or  surtax  the  same  as  pre- 
scribed in  the  case  of  citizens  of  the  United  States  or  persons  residing  in  the 
United  States. 

The  responsible  heads,  agents,  or  representatives  of  said  nonresident  aliens 
who  are  in  charge  of  the  property  owned  or  business  carried  on  shall  make 
full  and  complete  return  of  said  income  and  shall  pay  the  tax  as  provided 
herein. 

The  person,  firm,  company,  copartnership,  corporation,  joint- stock  company 
or  association,  and  insurance  company  in  the  United  States — citizen  or  resi- 
dent alien —  in  whatever  capacity  acting,  having  the  control,  receipt,  disposal, 
or  payment  of  fixed  or  determinable  annual  or  periodical  gains,  profits,  and 
income,  of  whatever  kind,  to  a  nonresident  alien,  under  any  contract  or  other- 
wise, and  which  payment  shall  represent  income  of  a  nonresident  alien  from 
the  exercise  of  any  trade  or  profession  within  the  United  States,  shall  make 
return  for  such  nonresident  alien  on  Form  1040  and  shall  pay  any  and  all  tax 
—normal  and  additional  tax — chargeable  upon  the  said  income  of  such  non- 
resident alien. 

W.  H.  OSBORN, 

Commissioner  of  Internal  Revenue. 
109 


.Form  1065.  Ed .  200,<x»-Aug.,i-i4. 

District  of .-  

UNITED  STATES  INTERNAL  REVENUE. 


RETURN  OF  ANNUAL  NET  INCOME. 

(Paragraph  D,  Section  2,  Act  of  Congress -approved  October  3, 1913,  and  Article  12,  Regulations  No. 


PARTNERSHIPS. 


RETURN  OF  NET  INCOME  of ....: .' !. 

(Name  of  partnership.) 


whose  principal  place  of  business  is  located  at   , .. 

(Street  and  number.) 

city  or  town  of . . ,  in  the  State  of 

( calendar ) 
for  the  j  >  year  ended  .  ,  191     . 


1 .  GROSS  INCOME  (see  Note  A,  page  4) $ . 

.2.  DEDUCTIONS: 

(a)  Total  amount  of  all  ordinary  and  necessary  expenses  paid 
within  the  year  for  the  maintenance  and  operation  of  the 
business  and  properties  of  the  partnership,  exclusive  of 
interest  payments  (see  Note  B,  page  4): .  $ „ 

(&)  Total  amount  of  losses  sustained  during  tb-3  year  not  com- 
pensated by  insurance  or  otherwise  (eoo  Note  1,  page  2)._  $ 


(<•)  Total   amount   of   depreciation   for   the   year    (see   Note    2, 

page  2)...' '.." $. 

(d)  .Total  amount  of  interest  paid  on  indebtedness $. 

(e)  Total  amount  of  interest  received  upon  obligations  of  a  State 

or  political  subdivision  thereof,  and  upon  the  obligations 
of  the  United  States  or  its  possessions $ . 

(/)  Total  taxes  paid  during  the  year _  _ $ _ 


TOTAL  DEDUCTION'S.    -  . .   $ . 


3.  Net  income  on  which  the  individual  members  are  subject  to  tax  on  their  distributive 

interest,  whether  distributed  or  not., ; $ 

NOTE. — The  above  blank  spaces  for  figures  should  show  the  amount  of  each  respective  item:     If 
-there  is  nothing  to  return  under  any  item,  the  word  "none"  must  be  written  in  such  blank  space. 


1 10 


2 
If  deductions  are  claimed  on  page  1,  state  here,  in  detail:  ,  . 

NOTE  1 .  If  loss,  of  what  the  loss  consisted,  when  it  was  actually  sustained,  and  how  it  was  deter- 
mined to  be  a  loss;  and  if  bad  debts,  of  what  they  consisted,  when  they  were  created,  when  and  how 
they  were  ascertained  to  be  worthless. 


NOTE  2.  If  depreciation,  the  character  of  the  property  on  which  depreciation  is  claimed;  if  buildings, 
the  character  of  the  buildings,  the  material  of  which  constructed,  when  erected,  the  cost,  and  the  basis 
on  which  deduction  claimed  was  made;  if  property  other  titan  buildings,  the  character  of  the  property, 
its  cost,  when  purchased,  and  the  basis  on  which  depreciation  was  claimed. 


4.  Members  of  partnership: 


PosT-Omc*  ADDBBM. 


Amount  of  distributive 
iotereot  ia  net  incom*. 


5.  Persons  who  are  citizens  or  residents  of  the  United  States  employed  by  your  firm,  either  as  mem* 
here  of  the  partnership  or  in  any  capacity  whatever,  to  each  of  whom  a  salary  or  compensation  in 
any  form  whatever  was  paid  to  the  amount  of  $3,000  or  over  for  services  rendered  during  the  calendar 
year.  For  the  year  1913  the  report  should  show  amounts  received  of  SfySOO  or  over  for  services 
rendered  from  March  1  to  December  SI,  1913,  inclusive. 


NAME 


POST-OFFICE  ADDRESS. 


Amount  of  salary  or 
compensation. 


It* 


County  of.  ....................  ,..,  to  wit: 

.  .....  .  ..,  Member  of  the  firm  of  ..  ...................... 

,-,  a  partnership,  whose  return  of  annual  net  income  is  set 


forth  hereto,  being  duly  sworn,  deposes  and  says  that  the  foregoing  report  and  the  several  items  therein 
act  forth  are,  to  his  beat  knowledge  and  belief  and  from  such  information  as  he  has  been  able  to  obtain, 
true  and  correct  in  each  and  every  particular;  that  the  amount  of  gross  income  therein  set  forth  is  the 
full  amount  of  gross  income,  without  any  deduction  whatsoever,  received  from  all  sources  by  the  said 
partnership  during  the  year  stated;  that  the  expenses  claimed  as  deductions  were  actually  incurred 
and  paid  during  the  year;  that  the  amount  claimed  for  losses  and  depreciation  are  believed  to  be  proper 
and  allowable  deductions  under  the  law,  and  that  the  net  income  therein  set  forth  is  the  full  amount 
of  the  distributive  interest  on  which  the  individual  members  are  subject  to  income  tax. 


For ,., ,.,  Partnership. 

Sworn  and  subscribed  to  before  me  this day  of 191 


NOTARIAL   SEAL. 


NOTE  A. — Gross  income  shall  consist  of  the  total  of  the  gross  revenues  derived  from  the  operation 
and  management  of  its  business  and  properties,  together  with  all  amounts  of  income  from  other  sources, 
including  dividends  received  on  stock  of  organizations,  and  interest  received  upon  obligations  of  a  State 
or  political  subdivision  thereof,  and  upon  the  obligations  of  the  United  States  or  its  possessions. 

NOTE  B. — Amounts  expended  in  making  permanent  improvements  or  betterments,  etc.,  or  in  any 
way  transferred  from  earnings  to  capital  account,  are  not  proper  deductions  in  ascertaining  annual  net 
income. 

NOTE  C. — This  return  of  net  income  is  desired  for  immediate  use  and  should  be  given  prompt  atten- 
tion and,  when  properly  filled  in  and  executed,  should  be  forwarded,  not  later  than  30  days  from  the 
date  of  receipt  of  notice,  direct  to  the  Commissioner  of  Internal  Revenue,  Washington,  D.  C. 

NOTE  D.— The  word  "year"  as  herein  used  means  the  calendar  or  fiscal  year,  as  the  case  may  be, 
and  this  return  is  to  show  the  net  earnings  for  the  year  as  of  the  date  on  which  the  books  were  closed 
or  the  net  earnings  were  ascertained. 


INCOME    TAX 

(T.  D.  2015.) 

Compromises — Minimum  amounts  which  will  be  accepted. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  August  13,  1914. 
To  collectors  of  internal  revenue: 

The  fact  has  been  developed  that  a  great  number  of  individuals 
and  corporations  failed  to  make  returns  of  annual  net  income  for 
the  income  tax,  either  through  ignorance  of  the  requirements  of 
the  law  or  through  a  misunderstanding  of  its  requirements,  and 
it  has  been  determined  by  the  Treasury  Department  to  accept 
offers  in  compromise  of  the  specific  penalty  for  failure  to  file  re- 
turns within  the  period  prescribed  by  law  in  a  minimum  sum,  as 
follows:  $5  from  individuals,  $10  from  corporations  which  are 
organized  for  profit. 

In  the  cases  of  all  corporations  not  organized  for  profit,  the 
specific  penalty  will  not  be  asserted  this  year,  provided  the  re- 
quired return  has  been  or  shall  be  filed  before  December  31,  1914. 
The  United  States  district  attorney  should  be  requested  not  to 
institute  proceedings  in  such  cases. 

The  foregoing  applies  only  to  those  cases  where  there  was  no 
intent  to  evade  the  law  or  escape  taxation. 

In  all  cases,  however,  wherein  a  return  is  not  made  until  the 
liability  to  make  a  return  is  discovered  by  investigation  of  col- 
lectors of  internal  revenue  or  revenue  agents,  the  above  schedule 
will  not  necessarily  apply,  but  each  individual  case  will  be  de- 
cided upon  its  own  merits  and  the  amount  of  the  offer  in  com- 
promise which  may  be  favorably  considered  will  be  determined 
accordingly. 

ROBERT  WILLIAMS,  JR., 
Acting  Commissioner  of  Internal  Revenue. 


(T.  D.  2016.) 

Inspection  of  income-tax  returns — Executive  order — Regulations. 

TREASURY  DEPARTMENT, 

OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 
Washington,  D.  C.,  August  18, 
To  internal-revenue  officers  and  others  concerned: 

The  following  Executive  order,  together  with  regulations  signed 
by  the  Secretary  and  approved  by  the  President,  relative  to  the 
publicity  feature  of  section  2  of  the  act  of  October  3,  1913,  impos- 
ing an  income  tax,  is  hereby  published  for  your  information. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


EXECUTIVE  ORDER. 

Pursuant  to  the  provisions  of  Section  2  of  the  Tariff  Act  of  October  3, 
1913,  said  section  providing  for  an  income  tax,  and  which  contains  in  para- 
graph G,  sub-paragraph  (d)  the  following  provision, 

J 14 


TREASURY  DECISIONS 

When  the:  assessment  shall  be  made,  as  provided  in  this  section,  the  returns, 
together  with  any  corrections  thereof  which  may  have  been  made  by  the 
Commissioner,  shall  be  filed  in  the  office  of  the  Commissioner  of  Internal 
Revenue  and  shall  constitute  public  records  and  be  open  to  inspection  as  such : 
Provided,  That  any  and  all  such  returns  shall  be  open  to  inspection  only  upon 
the  order  of  the  President,  under  rules  and  regulations  to  be  prescribed  by 
the  Secretary  of  the  Treasury  and  approved  by  the  President :  Provided  fur- 
ther, That  the  proper  officers  of  any  State  imposing  a  general  income  tax 
may,  upon  the  request  of  the  governor  thereof,  have  access  to  said  returns 
or  to  any  abstract  thereof,  showing  the  name  and  income  of  each  such  cor- 
poration, joint  stock  company,  association  or  insurance  company,  at  such 
times  and  in  such  manner  as  the  Secretary  of  the  Treasury  may  prescribe, 

it  is  hereby  ordered,  that  all  such  returns  shall  be  subject  to  inspection  in 
accordance  and  upon  compliance  with  rules  and  regulations  prescribed  by 
the  Secretary  of  the  Treasury  and  approved  by  the  President,  bearing  even 

date  herewith. 

WOODROW  WILSON 
THE  WHITE  HOUSE,  July  28,  1914. 

[No.  1999.] 

REGULATIONS  GOVERNING  THE  INSPECTION  OF  RETURNS  OF  CORPORATIONS,  JOINT- 
STOCK  COMPANIES.,  ASSOCIATIONS,  OR  INSURANCE  COMPANIES,  MADE  IN  COMPLI- 
ANCE WITH  THE  REQUIREMENTS  OF  SECTION  2  OF  THE  ACT  OF  OCTOBER  3,  1913. 

RETURNS  OF  INDIVIDUALS  ARE  NOT  OPEN  TO  THE  INSPECTION  OF  ANYONE  EXCEPT 
THE  PROPER  OFFICERS  AND  EMPLOYEES  OF  THE  TREASURY  DEPARTMENT. 

TREASURY  DEPARTMENT, 
Washington,  D.  C.,  July  28,  1914. 

Inspection  of  returns. 

By  section  2  of  the  act  of  October  3,  1913,  Congress  imposed  a  tax  upon  the 
entire  net  income  arising  or  accruing  from  all  sources  to  every  citizen  of  the 
United  States,  whether  residing  at  home  or  abroad,  and  to  every  person 
residing  in  the  United  States,  though  not  a  citizen  thereof,  and  upon  the 
entire  net  income  from  all  property  owned  and  of  every  business,  trade,  or 
profession  carried  on  in  the  United  States  by  persons  residing  elsewhere,  arid 
upon  every  corporation,  joint-stock  company  or  association,  and  every  insur- 
ance company,  with  certain  exceptions,  engaged  in  business  in  the  United 
States,  and  prescribed  the  method  of  handling  the  returns  of  annual  net 
income  filed  in  compliance  with  said  law,  as  follows: 

(d)  When  the  assessment  shall  be  made,  as  provided  in  this  section,  the 
returns,  together  with  any  corrections  thereof  which  may  have  been  made  by 
the  Commissioner,  shall  be  filed  in  the  office  of  the  Commissioner  of  Internal 
Revenue  and  shall  constitute  public  records  and  be  open  to  inspection  as  such : 
Provided,  That  any  and  all  such  returns  shall  be  open  to  inspection  only 
upon  the  order  of  the  President,  under  rules  and  regulations  to  be  prescribed 
by  the  Secretary  of  the  Treasury  and  approved  by  the  President:  Provided 
further,  That  the  proper  officers  of  any  State  imposing  a  general  income  tax 
may,  upon  the  request  of  the  governor  thereof,  have  access  to  said  returns 
or  to  an  abstract  thereof,  showing  the  name  and  income  of  each  such  corpo- 
ration, joint-stock  company  or  association  or  insurance  company, .  at  such 
times  and  in  such  manner  as  the  Secretary  of  the  Treasury  may  prescribe. 

For  the  purpose  of  making  effective  the  legislative  intent  thus  expressed, 
the  President  has  ordered  that  such  returns  shall  be  open  to  inspection  under 
the  following  rules  and  regulations.  The  word  "corporation,"  when  used 
alone  herein,  shall  be  construed  to  refer  to  corporations,  joint-stock  com- 
panies or  associations,  and  insurance  companies. 

1.  The  return  of  every  individual,  and  of  every  corporation,  joint-stock 
company  or  association,  and  every  insurance  company,  whether  foreign  or 
domestic,  shall  be  open  to  the  inspection  of  the  proper  officers  and  employees 
ufth.e  Treasury  Department.  Returns  of  individuals  shall  not  be  subject  to 

"5 


INCOME   TAX 

inspection  by  anyone  except  the  proper  officers  and  employees  of  the  Treasury 
Department. 

2.  Where  access  to  any  return  of  any  corporation  is  desired  by  an  officer 
or  employee  of  any  other  department  of  the  Government,  an  application  for 
permission  to  inspect  such  return,  setting  out  the  reasons  therefor,  shall  be 
made  in  writing,  signed  by  the  head  of  the  executive  department  or  other 
Government  establishment  in  which  such  officer  or  employee  is  employed,  and 
transmitted  to  the  Secretary  of  the  Treasury.    If  the  return  of  a  corporation 
is  desired  to  be  used  in  any  legal  proceedings  other  than  those  to  which  the 
United  States  is  a  party,  or  to  be  used  in  any  manner  by  which  any  informa- 
tion contained  in  the  return  could  be  made  public,  the  application  for  per- 
mission to  inspect  such  return  or  to  furnish  a  certified  copy  thereof  shall  be 
referred  to  the  Attorney  General,  and  if  recommended  by  him  transmitted 
to  the  Secretary  of  the  Treasury. 

3.  All  returns,  whether  of  persons  or  of  corporations,  joint-stock  companies 
or  associations,  or  insurance  companies,  may  be  furnished,  upon  approval  of 
the  Secretary  of  the  Treasury,  for  use,  either  in  the  original  or  by  certified 
copies  thereof,  in  any  legal  proceedings  before  any  United  States  grand  jury 
or  in  the  trial  of  any  cause  to  which  both  the  United  States  and  the  person 
or  corporation  or  association  rendering  the  return  are  parties  either  as  plain- 
tiff or  defendant,  and  in  the  prosecution  or  defense  or  trial  of  which  action, 
or  proceeding  before  a  grand  jury,  such  return  would  constitute  material 
evidence,  but  in  any  case  arising  in  the  collection  of  the  income  tax,  the 
Commissioner  of  Internal  Revenue  may  furnish  for  use  to  the  proper  officer 
either  the  original  or  certified  copies  of  returns  without  the  approval  of  the 
Secretary  of  the  Treasury.    In  all  cases  where  the  use  of  the  original  return 
is  necessary,  it  shall  be  placed  in  evidence  by  the  Commissioner  of  Internal 
Revenue  or  by  some  officer  of  the  Bureau  of  Internal  Revenue  designated  by 
him  for  that  purpose,  and  after  such  original  return  has  been  placed  in  evi- 
dence it  shall  be  returned  to  the  files  in  the  office  of  the  Commissioner  of 
Internal  Revenue  at  Washington,  D.  C. 

4.  The  Secretary  of  the  Treasury,  at  his  discretion,  upon  application  to  him 
made,  setting  forth  what  constitutes  a  proper  showing  of  cause,  may  permit 
inspection  of  the  return  of  any  corporation,  by  any  bona  fide  stockholder  in 
such  corporation.     The  person   desiring  to  inspect  such   return  shall  make 
application,  in  writing,  to  the  Secretary  of  the  Treasury,  setting  forth  the 
reasons  why  he  should  be  permitted  to  make  such  inspection,  and  shall  attach 
to  his  application  a  certificate,   signed  by  the  President,  or  other  principal 
officer  of  such  corporation,  countersigned  by  the  Secretary,  under  the  corpo- 
rate seal  of  the  company,  that  he  is  a  bona  fide  stockholder  in  said  company. 
(Where  this  certificate  can  not  be  secured,  other  evidence  will  be  considered 
by  the  Secretary  of  the  Treasury  to  determine  the  fact  whether  or  not  the 
applicant  is  a  bona  fide  stockholder  and,  therefore,  entitled  to  inspect  the 
return  made  by  such  company.)     Upon  receipt  of  such  application  the  corpo- 
ration whose  return  it  is  desired  to  inspect  shall  be  notified  of  the  facts  and 
shall  be  given  opportunity  to  state  whether  any  legitimate  reason  exists  for 
refusing  permission  to  inspect  its  returns  of  annual  net  income  by  the  stock- 
holder applying  for  permission  to  make  such  inspection.     The  privilege  of 
inspecting  the  return  of  any  corporation  is  personal  to  the  stockholders,  and 
the  permission  granted  by  the  Secretary  to  a  stockholder  to  make  such  inspec- 
tion can  not  be  delegated  to  any  other  person. 

5.  The  returns  of  the  following  corporations  shall  be  open  to  the  inspection 
of  any  person  upon  written  application  to  the  Secretary  of  the  Treasury, 
which  application  shall  set  forth  briefly  and  succinctly  all  facts  necessary  to 
enable  the  Secretary  to  act  upon  the  request : 

(a)  The   returns  of   all  companies  whose  stock  is  listed  upon  any  duly 
organized  and  recognized  stock  exchange  within  the  United  States,  for  the 
purpose  of  having  its  shares  dealt  in  by  the  public  generally. 

(b)  All  corporations  whose  stock  is  advertised  in  the  press  or  offered  to 
the  public  by  the  corporation  itself  for  sale.    In  case  of  doubt  as  to  whether 
any  company  falls  within  the  classification  above,  the  person  desiring  to  see 
such  return  should  make  application,  supported  by  advertisements,  prospec- 

1x6 


TREASURY  DECISIONS 

tus,  or  such  other  evidence  as  he  may  deem  proper  to  establish  the  fact  that 
the  stock  of  such  corporation  is  offered  for  general  public  sale. 

Returns  can  be  inspected  only  in  the  office  of  the  Commissoner  of  Internal 
Revenue,  in  Washington,  D.  C.  In  no  case  shall  any  collector,  or  any  other 
internal  revenue  officer  outside  of  the  Treasury  Department  in  Washington, 
permit  to  be  inspected  any  return  or  furnish  any  information  whatsoever 
relative  to  any  return  or  any  information  secured  by  him  in  his  official  capa- 
city relating  to  such  return,  except  in  answer  to  a  proper  subpcena,  in  a  case 
to  which  the  United  States  is  a  party. 

6.  Returns  of  individuals  shall  not  be  open  to  the  inspection  of  any  person 
other  than  the  proper  officers  and  employees  of  the  Treasury  Department  or 
person  rendering  the  same,  and  are  under  no  conditions  to  be  made  public, 
except  where  such  publicity  shall  result  through  the  use  of  such  returns  in 
any  legal  proceedings  in  which  the  United  States  is  a  party. 

7.  Upon  request  of  the  governor  of  a  State  imposing  a  general  income  tax, 
the  proper  officer  of  such  State,  to  be  designated  by  name  and  official  position 
by  the  governor  of  such   State  in  his  application  to  the  Secretary  of  the 
Treasury,  may  have  access  to  the  returns  or  to  abstracts  thereof  showing  the 
name  and  income  of  each  corporation,  joint  stock  company  or  association, 
or  insurance  company,  at  such  times  and  in  such  manner  as  the  Secretary  of 
the   Treasury   may   prescribe.     Such   application   shall   be   made   in   writing, 
addressed  to  the  Secretary  of  the  Treasury  and  shall  show  (first)  that  the 
State  whose  governor  makes  the  request,  imposes  a  general  income  tax;  (sec- 
ond)   the  name  and  address  of  each   corporation,   etc.,   to  which  access  is 
desired;   (third)  why  permission  to  inspect  the  returns  of  the  corporations, 
etc.,  named  in  the  request  is  desired,  and  (fourth)  what  officer  or  officers  are 
designated  to  make  the  desired  inspection,  giving  their  names  and  official  des- 
ignations.    Such  request  must  be  signed  by  the  governor  of  the  State  and 
sealed  with  the  seal  thereof,  and  shall  be  transmitted  to  the  Secretary  of  the 
Treasury  for  his  consideration  and  action  thereon. 

No  provision  is  made  in  the  law  for  furnishing  a  copy  of  any  return  to  any 
person  or  corporation,  and  no  copy  of  any  return  will  be  furnished  to  any 
other  than  the  person  or  corporation  making  the  return,  or  their  duly  con- 
stituted attorney,  except  as  hereinbefore  authorized. 

The  provisions  herein  contained  shall  be  effective  on  and  after  the  1st  day 
of  September,  1914. 

W.  G.  MCADOO, 
Secretary  of  the  Treasury. 
Approved : 
WOODROW  WILSON, 

The  White  House,  July  28,  1914. 


(T.  D.  2017.) 

Nontaxability  of  interest   from  bonds  and  dividends  on  stock  of  domestic 
corporations  owned  by  nonresident  aliens. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  August  25,  1914. 
To  collectors  of  internal  revenue: 

Interest  on  bonds  of  domestic  corporations  and  dividends  on 
stock  of  domestic  corporations  owned  by  nonresident  aliens,  and 
whether  such  bonds  and  stock  be  physically  located  within  or 
without  the  United  States,  are  not  subject  to  the  income  tax. 

W.  H.  OSBORN, 

Commissioner  of  Internal  Revenue. 
117 


INCOME   TAX      it 

(T.  D.  2022.) 

Waiver  until  further  notice  of  regulation  requiring  the  filling  in  on  certificates 
of  numbers  of  bonds. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  October  3,  1914. 

Notice  is  hereby  given  that  regulation  requiring  the  filling  in  on 
certificates  of  numbers  of  bonds  or  other  like  obligations  of  cor- 
porations, etc.,  from  which  interest  coupons  are  detached  or  upon 
which  registered  interest  is  to  be  paid — which  was  extended  to 
October  31,  1914,  by  T.  D.  1985,  issued  May  28,  1914— is  hereby 
waived  until  further  notice. 

ROBT.  WILLIAMS,  JR. 
Acting  Commissioner  of  Internal  Revenue. 


(T.  D.  2023.) 

Amending  article  58,  Income  Tax  Regulations  33,  requiring  indorsement  or 
stamp  on  foreign  coupons,  checks,  bills  of  exchange,  etc. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  October  12,  1914. 
To  collectors  of  internal  revenue: 

Article  58,  Income  Tax  Regulations  33,  is  hereby  amended  to 
read  as  follows : 

ARTICLE  58.  The  licensed  person,  firm,  or  corporation  first  receiving  such 
foreign  items  for  collection,  or  otherwise,  shall  withhold  therefrom  the  nor- 
mal tax  of  1  per  cent,  and  will  be  held  responsible  therefor.  If  the  foreign 
item  is  in. the  form  of  a  check  or  bill  of  exchange,  the  words  "Income  tax 

withheld  by "   (giving  name,  address,  and  date)   shall  be  indorsed  or 

stamped  thereon  by  such  licensee;  but  if  the  item  is  represented  by  a  coupon 
or  coupons  from  bonds,  the  licensee  shall  attach  thereto  a  statement  identify- 
ing the  same,  and  the  indorsement  or  stamp  showing  the  tax  withheld  shall,  be 
placed  on  the  statement  instead  of  the  coupon  or  coupons. 

Said  indorsement  or  stamp  shall  be  sufficient  evidence  of  tax  withheld  to 
relieve  subsequent  holders  or  purchasers  from  the  obligations  of  withholding. 

ROBT.  WILLIAMS,  JR. 
Acting  Commissioner  of  Internal  Revenue. 


(T.  D.  2028.) 

Income  tax — Five  per  cent  penalty  and  interest  on  delayed  payments. 

The  5  per  cent  penalty  and  interest  on  delayed  payment  of  assessed  income 
taxes  in  the  case  of  persons  absent  in  foreign  countries  held  to  be  due 
unless  payment  is  forwarded  within  ten  days  after  notice  and  demand, 
Form  17,  should  have  been  received  in  the  ordinary  course  of  the  mails.— 
T.  D.  1659  modified. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  October  24,  1914. 
To  collectors  of  internal  revenue: 

In  the  last  sentence  of  paragraph  E  of  section  2  of  the  act  of 
October  3,  1913,  it  is  provided: 

118 


TREASURY  DECISIONS 

•  *  *  *  And  to  any  sum  or  sums  due  and  unpaid  after  the  thirtieth  day  of 
June  in  any  year,  and  for  ten  days  after  notice  and  demand  thereof  by  the 
collector  there  shall  be  added  the  sum  of  5  per  centum  on  the  amount  of  tax 
unpaid,  and  interest  at  the  rate  of  1  per  centum  per  month  upon  said  tax  from 
the  time  the  same  becomes  due,  except  from  the  estates  of  insane,  deceased, 
or  insolvent  persons. 

By  reason  of  absence  in  foreign  countries  or  on  account  of 
traveling  abroad,  it  is  impossible  for  many  individuals  to  receive 
notice  and  demand  on  Form  17  and  make  payment  of  the  taxes 
assessed  thereon  so  the  same  can  be  received  by  the  collector 
within  the  10-day  period  following  June  30  or  within  the  10-day 
period  following  the  service  of  the  notice.  You  are  requested, 
therefore,  to  enter  on  Form  17,  as  the  date  on  which  such  assessed 
tax  becomes  due  and  payable  as  near  as  possible,  a  date  10  days 
subsequent  to  the  time  that  said  notice  should  be  received  in  the 
ordinary  course  of  the  mails  by  the  taxpayer,  and  where  it  ap- 
pears that  the  full  amount  of  tax  assessed  was  placed  in  the 
mails  within  the  10-day  period  after  the  receipt  of  Form  17,  or 
in  case  notice  so  sent  is  not  delivered  in  due  time  by  reason  of 
delay  in  the  mail  and  satisfactory  evidence  of  that  fact  is  fur- 
nished the  penalty  and  interest  in  such  cases  will  not  be  collected. 
In  the  latter  cases  the  envelope  inclosing  the  notice  and  bearing 
the  postmark  of  the  receiving  office  should  be  forwarded  to  .the 
collector  and  by  him  transmitted  to  this  office  with  Form  325 
as  evidence  of  delay  in  the  delivery  of  notice  so  sent. 

This  ruling  applies  solely  to  the  collection  of  income  tax  from 
individuals  and  includes  Government  officers.  T.  D.  1659  is 
modified  accordingly. 

W.  H.  OSBORN, 
Commissioner  of  Internal  Revenue. 


(T.  D.  2029.) 

Corporations  desiring  to  make  returns  of  annual  net  income  on  the  basis  of 
a  fiscal  year  must,  not  less  than  30  days  prior  to  the  first  day  of  March, 
give  notice  in  writing  to  the  collector,  designating  in  such  notice  the  last 
day  of  some  month  as  the  close  of  the  fiscal  year,  in  which  case  the  fiscal 
year  return  will  cover  a  12-months  period.  The  return  for  that  portion 
of  the  calendar  year  preceding  the  beginning  of  the  fiscal  year  will  be 
filed  on  or  before  March  next  following. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  October  24,  1914. 

To  collectors  of  internal  revenue: 

Reference  is  made  to  T.  D.  2001,  relative  to  the  designation  by 
corporations  of  a  fiscal  year  other  than  a  calendar  year  as  a  basis 
for  making  returns  of  annual  net  income. 

You  are  informed  that  every  corporation  amenable  to  the  in- 
come-tax law  in  existence  at  the  close  of  a  calendar  year  is 
required  to  file  a  return  covering  all  or  any  part  of  the  preceding 

119 


INCOME   TAX 

calendar  year  during  which  it  may  have  been  in  existence  on  or 
before  March  1,  provided  such  corporation  has  not  established 
or  does  not  establish  a  fiscal  year. 

In  order  to  establish  a  fiscal  year  it  is  necessary  for  the  corpo- 
ration to  give  notice  to  you  in  writing  designating  the  last  day 
of  some  month  as  the  close  of  its  fiscal  year.  This  notice  must 
be  filed  not  less  than  30  days  prior  to  March  1  of  the  year  in 
which  the  fiscal-year  period  of  12  months  closes.  A  return  for 
that  portion  of  the  calendar  year  preceding  the  commencement 
of  the  fiscal  period  of  12*  months  is  required  to  be  filed  on  or 
before  March  1  of  the  year  next  following  the  calendar  year  of 
which  it  is  a  part,  and  the  return  for  the  first  full  fiscal  year  is 
required  to  be  filed  on  or  before  the  last  day  of  the  60-day  period 
following  the  close  of  the  fiscal  year. 

Example:  A  corporation  desiring  to  establish  its  fiscal  year  as 
ending  on  June  30,  1915,  must  file  notice  not  less  than  thirty  (30) 
days  prior  to  March  1,  1915,  on  or  before  January  29,  1915.  A 
return  for  the  period  January  1  to  June  30,  1914,  must  then  be 
filed  on  or  before  March  1,  1915,  and  a  return  for  the  first  fiscal 
year  period  (July  1,  1914,  to  June  30,  1915)  must  be  filed  on  or 
before  August  29,  1915. 

That  portion  of  the  year  preceding  the  beginning  of  an  estab- 
lished fiscal  year  is  held  to  be  a  fractional  part  of  the  calendar 
year,  and  as  the  return  of  a  calendar  year  is  not  required  to  be 
filed  until  on  or  before  the  first  day  of  March  next  following, 
there  is  no  provision  of  law  whereby  the  return  covering  a  frac- 
tion of  a  calendar  year  is  required  to  be  filed  earlier  than  "on  or 
before"  the  next  March  1st,  though  it  is  preferred  that  the  return 
for  this  fraction  shall  be  filed  as  early  as  possible  after  the  close 
of  the  period. 

The  above  instructions  are  supplemental  to  T.  D.  2001,  and 
rulings  or  decisions  heretofore  issued  in  conflict  with  the  foreT 
going  are  hereby  revoked. 

W.  H.  OSBORNE, 
Commissioner  of  Internal  Revenue. 


(T.  D.  2030.) 

Exemption  certificate  provided  for  use  of  banks  and  bankers,  either  foreign 
or  domestic,  claiming  exemption  from  income  tax  on  dividends  from 
stock  of  foreign  corporations  owned  by  nonresident  aliens. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  October  13,  1914. 

To  collectors  of  internal  revenue: 

The  following  certificate  is  hereby  provided,  which  may  be 
executed  by  responsible  banks  or  bankers,  either  foreign  or  do- 
mestic, for  and  on  behalf  of  nonresident  owners  of  stock  of  cor- 

120 


TREASURY  DECISIONS 


porations   of   foreign   countries,    for    the   purpose    of   claiming 
exemption  from  the  income  tax  on  dividends  from  such  stock : 

Form . 

EXEMPTION   CERTIFICATE— BANKS  OR  BANKERS,  EITHER  FOREIGN  OR 

DOMESTIC. 

(For  the  use  of  responsible  banks  or  bankers,  either  foreign  or  domestic, 
for  and  on  behalf  of  nonresident  owners  of  stock  of  corporations  of 
foreign  countries.) 


(Give  name  of  foreign  corporation.) 


(Full  description  of  stock,  stating  whether  common  or  preferred,  or  both.) 

Amount  of  dividends,  $ 

I  (we)  do  solemnly  declare  that  the  owners  of  the  stock  of  for- 
eign corporations  upon  which  the  aforesaid  dividends  were  declared 
are  nonresident  aliens  as  to  the  United  States  and  are  exempt  from 
the  income  tax  imposed  on  such  income  by  the  United  States  Govern- 
ment under  the  law  enacted  October  3,  1913;  that  no  citizen  of  the 
United  States,  wherever  residing,  or  foreigner  residing  in  the  United 
States,  or  in  any  of  its  possessions,  has  any  interest  in  said  stock; 
and  that  all  of  the  information  as  given  in  this  certificate  is  true 
and  correct.  I  (we)  hereby  agree  that  if  at  any  time  it  shall  appear 
that  the  income  or  any  part  thereof  represented  or  covered  by  this 
certificate  was,  or  is,  subject  to  the  normal  tax  imposed  by  the 
United  States,  upon  presentation  of  proof  of  that  fact  to  me  (us) 
by,  from,  or  through  the  Commissioner  of  Internal  Revenue,  Wash- 
ington, D.  C,  I  (we)  will  pay  and  remit  to  the  United  States  Gov- 
ernment the  amount  of  tax  claimed  to  be  due;  and  I  (we)  hereby 
further  agree  that  whenever  in  the  judgment  of  the  Commissioner 
of  Internal  Revenue  it  shall  be  necessary  in  or  to  the  administration 
of  the  income-tax  law,  I  (we)  will,  upon  request  of  said  Commis- 
sioner of  Internal  Revenue,  disclose  and  furnish  to  him  the  names 
and  addresses  of  the  owners  and  the  amount  of  the  stock  aforesaid. 


Date ,   191  

(Name  of  bank  or  banker.) 


By  

(Signature   of   official  authorized   to  sign.) 


(Official  position.) 


(Full  post-office  address  of  bank  or 
banker. ) 


(SIGNATURES    MUST  BE  CLEARLY  AND  LEGIBLY   WRITTEN.) 


INCOME    TAX 

The  above  certificate  shall  be  in  size  8  by  Zl/2  inches,  and 
shall  be  printed  to  read  from  left  to  right  along  the  8-inch  dimen- 
sion. 

The  certificate  shall  be  printed  on  yellow  paper,  and  such  paper 
shall  correspond  in  weight  and  texture  to  white  writing  paper, 
21  by  32,  about  40  pounds  to  the  ream  of  500  sheets. 

The  certificate  hereby  authorized  will  be  printed  by  the  Gov- 
ernment and  furnished  without  cost. 

-  Banks  or  bankers  desiring  to  furnish  their  own  certificates  may 
do  so,  but  the  certificate  so  printed  must  conform  in  size  to  that 
prescribed  above  and  be  printed  in  similar  type  upon  the  same 
color,  shade,  and  weight  of  paper  as  used  by  the  Government. 

Sample  certificates  showing  size  of  type  and  color  of  paper  can 
be  secured  from  collectors  of  internal  revenue  in  their  several 
districts  or  from  the  Commissioner  of  Internal  Revenue,  Wash- 
ington, D.  C. 

W.  H.  OSBORN, 

Approved:  Commissioner  of  Internal  Revenue. 

W.  G/McADOO, 

Secretary  of  the  Treasury. 


(T.  D.  2048.) 

Income  tax. 

Taxable  status  of  dividends  paid  on  the  capital  stock  from  the  current  net 
earnings  or  established  surplus  created  from  the  net  earnings  of  cor- 
porations, joint-stock  companies  or  associations,  and  insurance  companies 
taxable  upon  their  net  income. 

TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  November  12,  1914. 
To  collectors  of  internal  revenue : 

Dividends  from  the  net  earnings  or  established  surplus  created 
from  the  net  earnings  of  any  corporation,  joint-stock  cdmpany  or 
association,  and  insurance  company  are  vested  in  the  stockholder  on 
the  date  on  which  such  dividends  are  declared,  whether  distributed 
or  not,  regardless  of  the  time  when  the  surplus  or  undivided  profits 
from  which  such  dividends  are  declared  were  earned  and  entered 
on  the  books  of  the  corporation  as  such.  Dividends  so  declared 
should  be  accounted  for  in  full  in  the  returns  of  income  of  indi- 
viduals for  the  year  in  which  they  became  due  and  payable,  when- 
ever the  amount  of  income  is  sufficient  to  require  the  inclusion  of 
dividends,  as  provided  in  paragraph  D  of  the  income-tax  law  and 
T.  D.  1945,  and  should  be  included  in  the  gross  income  of  corpora- 
tions, etc.,  regardless  of  the  amount  of  income. 

All  decisions  and  regulations  which  are  in  conflict  herewith  are 
hereby  revoked. 

W.  H.  OSBORN, 

Approved:  Commissioner  of  Internal  Revenue. 

W.  G.  McAixx), 

Secretary  of  the  Treasury. 


United  States  Income  Tax  Ques 
tions  and  Answers 


Question  No.  1. 

Q.     From  whom  can  I  get  the  prescribed  form  upon  which  to 
make  return? 

A.     At  the  office  of  the  Collector  of  Internal  Revenue  for  your 
District. 


Question  No.  8. 

Q.  Must  I  call  on  the  Collector  of  Internal  Revenue  to  furnish 
me  with  blanks  on  which  to  make  my  income  return  or  will 
it  be  safe  for  me  to  wait  until  he  or  his  deputies  send  me 
the  blanks? 

A.  You  should  call  on  the  Collector  and  obtain  blanks.  If  you 
wait  until  the  Collector  calls  on  you  you  will  probably  in- 
cur the  penalties  provided  in  the  Act. 


Question  No.  3. 

Q.     What  period  must  my  first  return  cover? 
A.     From  March  1st,  1913,  to  December  31st,  1913. 

Question  No.  4. 
Q.     Who  must  make  a  return? 

A.  Every  person  of  lawful  age  having  an  annual  net  income  of 
$3,000  or  over  (for  the  year  1913  those  having  a  net  income 
of  $2,500  or  over  from  March  1st,  1913,  to  December  31st, 
1913)  must  make  a  return  to  the  Collector  of  Internal  Rev- 
enue for  the  District  in  which  such  person  resides  or  has  his 
principal  place  of  business.  If  the  normal  one  per  cent  tax 
has  been  deducted  at  the  source  on  all  the  income  of  an 
individual  such  individual  need  not  make  a  return  unless 
his  income  exceeds  $20,000,  in  which  case  he  would  be  liable 
for  the  additional  tax. 


(T.  D.  1934.) 

Individuals  whose  net  income  from  March  1  to  December  31, 
1913,  both  dates  inclusive,  is  $2,500  or  more  must  make  returns 
of  annual  net  income  for  1913. 

Section  2,  Act  of  October  3,  1913,  provides  that  on  or  before 
the  first  day  of  March,  1914,  and  the  first  day  of  March  in  each 
year  thereafter,  a  true  and  accurate  return,  under  oath  or  affirma- 
tion, shall  be  made  to  the  Collector  of  Internal  Revenue  by  each 
person  of  lawful  age,  who  may  be  subject  to  the  tax  imposed  by 
this  section,  who  has  a  net  income  of  $3,000  or  over  for  the  tax- 
able year. 

It  is  further  provided  that  for  the  year  ending  December  31, 
1913,  the  tax  shall  be  computed  on  the  net  income  accruing  from 
March  1  to  December  31,  1913,  both  dates  inclusive,  after  de- 
ducting five-sixths  only  of  the  specific  exemption  and  deductions 
allowable  for  an  entire  taxable  year. 

Since  the  return  of  annual  net  income  for  the  year  1913,  as 
applied  to  individuals,  is  for  but  five-sixths  of  the  calendar  year, 
and  as  the  law  provides  that  return  shall  be  made  on  the  basis 
of  five-sixths  of  the  year,  it  is  held  that  individuals  whose  net 
income  is  $2,500  or  more  for  the  ten  months  constituting  the 
taxable  period  of  1913,  shall  make  returns  of  annual  net  income, 
in  accordance  with  the  general  provisions  of  the  law  covering 
the  1913  taxable  period. 


Question  No.  5. 

Q.  If  my  annual  net  income  from  all  sources  is  less  than 
$3,000  must  I  make  return? 

A.  Unless  your  net  income  for  the  ten  months'  period,  March 
1st  to  December  31st,  1913,  is  $2,500  or  over  (exclusive  of 
dividends  and  amounts  on  which  the  tax  has  been  withheld 
at  the  source)  no  return  is  required. 


Question  No.  6. 

Q.  Who  can  make  a  return  for  a  minor  having  a  taxable  in- 
come? 

A.  The  father  of  the  minor  should  make  return,  including  such 
income  with  his  own,  otherwise  the  legal  guardian  or  trus- 
tee should  make  return  for  the  minor. 


Question  No.  7. 

Q.     What  income  must  be  included  in  an  individual's  return? 

4 


A.  "Gains,  profits  and  income  derived  from  salaries,  wages  or 
compensation  for  personal  service  of  whatever  kind  and  in 
whatever  form  paid,  or  from  professions,  vocations,  busi- 
nesses, trade,  commerce  or  sales,  or  dealings  in  property, 
whether  real  or  personal,  growing  out  of  the  ownership  or 
use  of  or  interest  in  real  or  personal  property;  also  from 
interest,  rent,  dividends,  securities,  or  the  transaction  of  any 
lawful  business  carried  on  for  gain  or  profit,  or  gains  or 
profit  and  income  derived  from  any  source  whatever,  in- 
cluding the  income  from,  but  not  the  value  of,  property 
acquired  by  gift,  bequest,  devise  or  descent." 

The  statute  exempts  the  proceeds  of  life  insurance  policies, 
salaries  of  certain  public  officers,  and  all  interest  upon  obli- 
gations of  the  United  States  Government  or  the  government 
of  any  state,  city,  county,  town  or  village  or  political  sub- 
division thereof.  Exempted  items  need  not  be  included  in 
the  return. 

(See  Form  1040,  page  71.) 


Question  No.  8. 

Q.  If  my  net  income  exclusive  of  dividends  on  stock  of  corpora- 
tions does  not  exceed  $2,500,  March  1  to  December  31,  1913, 
must  I  make  a  return  for  the  purpose  of  the  normal  tax? 

A.  Persons  having  an  annual  income  of  $3,000  or  more,  includ- 
ing income  derived  from-  dividends  or  net  earnings  of  cor- 
porations, etc.,  but  whose  total  net  income  is  less  than 
$20,000,  and  whose  net  income  exclusive  of  the  income 
derived  from  dividends  or  net  earnings  of  such  corporation, 
etc.,  is  less  than  $3,000  for  the  taxable  year  ($2,500  for  the 
year  1913)  shall  not  be  required  to  make  a  return  of  annual 
net  income. 


Question  No.  9. 

Q.  If  my  gross  annual  income  is  $3,700,  and  after  the  payment 
of  taxes  and  interest  on  mortgages  aggregating  $800  my  net 
income  is  $2,900,  must  I  make  a  return? 

A.  No,  because  five-sixths  of  your  net  income  for  1913  is  less 
than  $2,500. 


Question  No.  10. 

Q.  If  the  income  of  a  civil  war  veteran  exceeds  his  exemption 
is  his  pension  from  the  United  States  Government  subject 
to  tax? 


A.  All  compensation  paid  by  the  United  States  Government, 
as  salaries,  pensions,  etc.,  subject  to  the  exemptions  and  de- 
ductions specifically  set  forth  in  the  statute,  are  taxable. 


Question  No.  11. 

Q.  I  purchased  100  shares  of  stdck  in  December,  1912,  at  $120 
per  share,  and  sold  the  same  in  September,  1913,  at  $140  per 
share.  Must  I  include  the  profit  as  income? 

A.  The  profit  constitutes  income  as  it  was  realized  during  the 
taxable  period  by  the  sale  of  the  stock. 


Question  No.  12. 

Q.  I  purchased  a  house  in  1908  for  $10,000  and  sold  it  in  De- 
cember, 1913,  for  $13,000.  Must  I  include  in  my  return  for 
the  ten  months'  period  of  1913  the  total  profit  made? 

A.  Where  the  profit  is  made  upon  the  sale  of  property  pur- 
chased prior  to  March  1st,  1913,  such  profit  should  be  appor- 
tioned according  to  the  number  of  years  the  property  was 
held,  unless  it  can  be  established  what  profit,  if  any,  accrued 
subsequent  to  March  1st,  1913.  Where  property  is  pur- 
chased after  March  1st,  1913,  and  sold  subsequently,  the 
profit  made  would  be  considered  income  for  the  year  in 
which  the  property  is  sold,  unless  an  annual  estimated  in- 
crease shall  have  been  included  in  the  return  for  each  year, 
as  required  by  the  Treasury  Department  Regulations. 


Question  No.  13. 

Q.  My  salary  is  $1,500;  my  income  from  bonds  about  $1,500. 
I  also  earn  $700  to  $800  annually  by  tutonng,  but  I  have 
never  kept  any  accurate  account  of  the  amount  thus  earned, 
as  it  is  an  uncertain  sum.  Must  I  report  that  as  part  of  my 
income,  and  if  so,  on  what  part  of  my  income  shall  I  be 
taxed? 

A.  You  are  subject  to  the  normal  tax  of  one  per  cent  on  your 
net  income  in  excess  of  $3,000.  The  fact  that  you  have 
never  before  kept  an  account  will  not  excuse  you  from 
your  obligation  to  make  a  return  to  the  Collector  of  Inter- 
nal Revenue. 


Question  No.  14. 

Q.     Am  I  required  to  find  out  what  is  my  share  of  the  undivided 
portion  of  a  corporation's  profits  and  pay  the  tax  thereon,  or 

6 


do  I  have  to  pay  only  on  my  salary  and  dividends  actually 
received? 

A.  You  are  not  required  to  pay  a  tax  on  the  undivided  portion 
of  the  corporation's  profits  unless  the  Secretary  of  the  Treas- 
ury shall  certify  that  the  accumulated  earnings  of  the  cor- 
poration are  unreasonable  for  the  needs  of  the  business,  or 
unless  such  accumulation  is  for  the  fraudulent  purpose  of 
evading-  the  payment  of  the  tax,  you  need  only  make  a  return 
of  your  salary  and  dividends. 


Question  No.  15. 

Q.  If  I  have  stock  in  a  company  is  it  necessary  for  me  to  notify 
the  company  that  my  income  is  not  above  $3,000,  and  must  I 
claim  exemption  each  time  a  dividend  is  declared? 

A.  The  act  specifically  exempts  dividends  of  a  corporation  from 
operation  of  the  normal  tax.  Where  the  corporation  is  sub- 
ject to  the  normal  tax  of  one  per  cent  upon  its  net  earnings 
no  notice  to  the  corporation  is  necessary. 


Question  No.  16. 

Q.     I  own  my  residence.    Must  I  include  in  my  gross  income  the 
fair  rental  value  of  the  residence? 

A.     No. 


Question  No.  17. 

Q.  My  property  is  mostly  vacant  lands,  bringing  no  income. 
The  land  will  sell  at  an  advance  of  what  it  cost  me  years  ago. 
Must  I  make  a  return  of  the  increased  value  of  my  land? 

A.  Unless  the  increased  value  of  personal  property  or  land  is 
credited  on  your  books  and  carried  as  an  asset  it  is  not  tax- 
able as  income  until  the  property  or  land  is  sold,  and  where 
the  increase  in  value  extends  over  a  number  of  years  only  a 
portion  of  such  profit  is  income  for  the  year  1913. 


Question  No.  18. 

Q.  Does  an  individual  have  to  pay  the  tax  on  annual  bonuses 
given  to  him  as  a  reward  for  meritorious  service  by  his  em- 
ployer? 

A.     The  bonuses,  being  gifts,  are  not  taxable. 


Question  No.  19. 

Q.  Can  I  lawfully  be  taxed  on  interest  earned  in  the  last  two 
or  three  years,  or  interest  accrued  prior  to  March  1st,  1913? 

A.  According  to  the  ruling  of  the  Treasury  Department  you 
are  taxable  on  all  amounts  received  or  accruing  to  you  sub- 
sequent to  March  1st,  1913. 

Accrued  means  due  and  payable. 

Accruing  means  having  arrived  at  an  accrued  state  during  the 
year  and  not  the  process  of  accruing,  and  an  individual  who  re- 
ceives the  interest  payment,  whether  upon  coupon,  registered  in- 
terest or  demand  notes,  and  the  interest  falls  upon  March  1,  1913, 
or  any  date  thereafter  within  the  year,  the  income  received  from 
such  securities  shall  be  returned  as  income  for  the  taxable  year 
of  1913,  because  the  amount  received  by  the  individual  became 
due  and  payable  within  the  taxable  period. 

On  the  payment  of  interest  on  coupons  from  bonds,  notes  or 
mortgages  of  individuals  no  tax  is  to  be  withheld  unless  the  pay- 
ment exceeds  $3,000,  and  if  the  specific  exemption  is  claimed  as 
allowed  under  paragraph  "C"  of  the  Act,  only  on  the  amount  in 
excess  of  the  exemption  thus  claimed. 


Question  No.  20. 

Q.  When  must  I  pay  the  tax  on  the  amount  of  my  return  which 
I  am  required  to  make  on  or  before  March  1st? 

A.  The  tax  will  be  calculated  on  income  from  March  1st  to 
December  31st  for  the  year  1913.  In  computing  the  tax  for 
this  period  the  income  for  the  ten  months  stated  will  be  taken 
and  the  deductions  shall  be  five-sixths  only  of  the  subsequent 
deductions  and  exemptions  allowed  in  Paragraphs  B  and  C 
of  the  statute. 

The  amount  of  the  tax  assessed  will  be  made  after  March  1st 
and  taxable  persons  will  be  notified  of  the  amount  of  the 
tax  for  which  they  are  responsible  on  or  before  the  first 
day  of  June.  The  tax  assessed  must  be  paid  on  or  before  the 
30th  day  of  June.  If  taxes  due  and  payable  on  or  before 
June  30th  are  not  paid  at  that  time  the  Collector  will  serve 
a  ten-day  notice  and  demand  for  the  same,  and  if  not  paid 
before  the  expiration  of  ten  days  there  will  be  added  to  the 
tax  5  per  cent  of  the  amount  of  the  taxes  unpaid  and  interest 
at  the  rate  of  1  per  cent  per  month  until  paid. 

Question  No.  21. 

Q.  My  income  exceeds  $30,000  per  year,  being  derived  in  part 
from  salary,  interest  and  rents,  but  principally  from  dividends 
on  bank,  railroad  and  industrial  stocks ;  must  I  make  a  return 

8 


of  the  dividends  received,  and  am  I  liable'  for  the  additional 
tax  of  1  per  cent  on  the  amount  in  excess  of  $20,000? 

A.  You  are  required  to  make  a  return  of  dividends  received  and 
you  are  subject  to  the  additional  tax  of  1  per  cent  on  the 
amount  in  excess  of  $20,000  without  any  exemption  what- 
ever. The  exemptions  in  Paragraph  C  apply  only  to  the 
computation  of  the  normal  tax. 

(See    Form    1040,    page   71.) 


Question  No.  22. 

Q.  How  can  an  extension  of  time  be  obtained  to  file  the  return 
subsequent  to  March  1st? 

A.  In  cases  of  sickness  or  absence  the  time  for  filing-  the  return 
may  be  extended  thirty  days  upon  application  to  the  Col- 
lector of  Internal  Revenue  for  the  district  in  which  you  live, 
providing  such  application  is  made  in  writing  within  the 
period  for  which  the  extension  is  desired. 


Question  No.  23. 
Q.     What  deductions  are  allowed  an  individual? 

A.  (1)  Necessary  expenses  actually  paid  in  carrying  on  any 
business,  not  including  personal  living,  or  family  or 
partnership  expenses. 

(2)  Interest  on  indebtedness  paid  within  the  taxable  year. 

(3)  All  taxes,  not  including  assessments  for  local  benefits, 
unless  such  assessments  for  local  benefits  are  assessed 
against  everyone  within  the  political  subdivision  of  the 
state,  county,  city  or  village. 

(4)  Losses  actually  sustained  in  trade  or  from  fires,  storms 
or  shipwreck  not  compensated  for  by  insurance  or  oth- 
erwise. 

(5)  Debts  due  to  taxpayer  actually  ascertained  to  be  worth- 
less and  charged  off  during  the  year. 

(6)  A  reasonable  allowance  for  depreciation. 

(7)  Dividends  upon  the  stock  of  any  corporation  or  asso- 
ciation taxable  upon  its  net  income.     (Not  deductible 
in  determining  additional  tax.) 

(8)  Amount  of  income  upon  which  a  tax  has  been  deducted 
or  paid  at  source. 

(9)  $3,000  of  income  for  a  single  person,  and  in  case  of 
husband  and  wife,  when  living  together,  $4,000  from 
the  aggregate  income  of  both  husband  and  wife. 


Question  No.  24. 

Q.     When  and  how  must  married  persons  living  together  make 
return  ? 

A.  Every  single  person,  and  every  married  person  not  living 
with  husband  or  wife  in  the  sense  below  defined,  who  has  a  net 
income  exceeding  $3,000  per  annum,  is  liable  to  pay  the  normal 
income  tax  under  this  law,  but  in  making  return  for  such  tax 
may  claim  an  exemption  of  $3,000  from  their  total  net  income. 

Husband  and  wife  living  together  are  entitled  to  an  exemp- 
tion of  $4,000  only  from  the  aggregate  net  income  of  both,  which 
may  be  deducted  in  making  the  return  of  such  aggregate  income 
for  taxation.  However,  when  the  husband  and  wife  are  sepa- 
rated, and  living  permanently  apart  from  each  other,  each  shall 
be  entitled  to  the  exemption  of  $3,000. 

If  the  husband  and  wife  not  living  apart  have  separate  es- 
tates, the  income  from  both  may  be  made  on  one  return,  but  the 
amount  of  income  of  each,  and  the  full  name  and  address  of 
both,  must  be  shown  in  such  return. 

The  husband,  as  the  head  and  legal  representative  of  the 
household  and  general  custodian  of  its  income,  should  make  and 
render  the  return  of  the  aggregate  income  of  himself  and  wife, 
and  for  the  purpose  of  levying  the  income  tax  it  is  assumed 
that  he  can  ascertain  the  total  amount  of  said  income. 

If  a  wife  has  a  separate  estate  managed  by  herself  as  her  own 
separate  property,  and  receives  an  income  of  more  than  $3,000, 
she  may  make  return  of  her  own  income,  and  if  the  husband  has 
other  net  income,  making  the  aggregate  of  both  incomes  more 
than  $4,000,  the  wife's  return  should  be  attached  to  the  return 
of  her  husband,  or  his  income  should  be  included  in  her  return, 
in  order  that  a  deduction  of  $4,000  may  be  made  from  the  ag- 
gregate of  both  incomes.  The  tax  in  such  case,  however,  will 
be  imposed  only  upon  so  much  of  the  aggregate  income  of  both 
as  shall  exceed  $4,000. 

If  either  husband  or  wife  separately  has  an  income  equal  to 
or  in  excess  of  $3,000,  a  return  of  annual  net  income  is  required 
under  the  law,  and  such  return  must  include  the  income  of  both, 
and  in  such  case  the  return  must  be  made  even  though  the  com- 
bined income  of  both  be  less  than  $4,000. 

If  the  aggregate  net  income  of  both  exceeds  $4,000,  an  annual 
return  of  their  combined  incomes  must  be  made  in  the  manner 
stated,  although  neither  one  separately  has  an  income  of  $3,000 
per  annum.  They  are  jointly  and  separately  liable  for  such  re- 
turn and  for  the  payment  of  the  tax. 

The  single  or  married  status  of  the  person  claiming  the  spe- 
cific exemption  shall  be  determined  as  of  the  time  of  claiming 
such  exemption,  if  such  claim  be  made  within  the  year  for  which 

10 


return  is  made,  otherwise  the  status  at  the  close  of  the  year. 

These  regulations  hereby  supersede  the  regulations  relative 
to  Paragraph  "C"  of  the  Income  Tax  Law,  as  prescribed  on  page 
4  of  Regulations,  part  2,  issued  under  date  of  October  31,  1913. 


Question  No.  25. 

Q.  Who  may  claim  exemption  of  $4,000  the  husband  or  the 
wife? 

A.  If  husband  and  wife,  when  living  together,  file  separate  re- 
turns the  $4,000  exemption  may  be  deducted  by  either  one 
or  may  be  apportioned  between  them. 


Question  No.  26. 
Q.     When  must  widowers  or  widows  make  return? 

A.  When  the  annual  net  income  amounts  to  $3,000  or  over 
($2,500  or  over  for  the  period  from  March  1st,  1913,  to 
December  31st,  1913)  the  exemption  allowed  in  this  in- 
stance from  the  annual  net  income  is  $3,000.  (For  the  ten 
months'  period  of  1913,  $2,500.) 


Question  No.  27. 

Q.  Mr.  C.  is  chief  clerk  in  a  large  office  and  has  an  income  of 
$300  per  month,  or  $3,600  annually.  Out  of  this  he  sup- 
ports his  widowed  mother.  Is  he  allowed  an  exemption  of 
$3,000  or  $4,000? 

A.  C.  being  unmarried,  is  entitled  to  an  exemption  of  only 
$3,000. 


Question  No.  28. 

Q.  If  an  unmarried  person's  income  or  salary  is  $5,000  per 
year,  but  it  costs  him  $2,000  to  live,  will  this  not  make  his 
net  income  $3,000,  and  therefore,  not  taxable? 

A.  An  unmarried  person's  exemption  is  $3,000.  Living  ex- 
penses are  not  deductible. 


Question  No.  29. 

Q.  Can  a  doctor  deduct  his  automobile  expenses,  including 
chauffeur  and  upkeep  of  an  automobile,  from  his  gross  in- 
come? Can  a  banker  or  real  estate  man  who  uses  his  auto- 

11 


mobile  largely  in  going  to  and  from  his  business  and  in 
looking  after  his  loans  and  real  estate  business,  deduct  his 
automobile  expenses? 

A.     The  actual  upkeep  in  the  conduct  of  his  business  or  profes- 
sion is  deductible. 


Question  No.  30. 

Q.  Regarding  the  Income  Tax,  what  should  be  included  in  the 
"Expense  Account"  of  a  physician  and  surgeon  to  arrive  at 
his  net  income?  Aside  from  general  running  expenses,  in- 
terest on  outstanding  obligations,  bad  accounts  to  be 
charged  off,  can  he  include  cost  of  instruments,  medical 
books  and  journals  he  buys  and  subscribes  for,  the  study 
of  which  enables  him  to  perfect  himself  in  his  practice? 

A.     Yes. 


Question  No.  31. 

Q.  I,  own  my  residence,  which  is  mortgaged  for  $5,000.  Can 
I  deduct  interest  on  the  mortgage,  repairs,  fire  insurance 
premiums  and  taxes? 

A.  You  may  deduct  interest  and  taxes  paid,  but  you  cannot  de- 
duct cost  of  repairs  or  fire  insurance  premiums. 


Question  No.  32. 

Q.  A  has  property  valued  at  $40,000.  The  property  at  the  end 
of  the  year  is  worth  only  $39,000.  Will  the  $1,000  deprecia- 
tion be  allowed  as  a  deduction  from  A.'s  gross  income? 

A.  A  reasonable  depreciation  is  deductible.  The  percentage 
depends  entirely  upon  the  nature  of  the  property  and  the 
use  to  which  it  is  put.  In  the  case  of  flat  buildings  three 
per  cent  is  a  reasonable  depreciation,  while  in  the  case  of  a 
factory  building  wherein  heavy  machinery  is  being  operated 
ten  per  cent  might  be  a  reasonable  annual  depreciation.  The 
depreciation  is  in  direct  .ratio  to  the  life  of  the  building. 


Question  No.  33. 

Q.  I  own  a  building  worth  $3,000.  Repairs  for  the  past  year 
have  cost  $500.  Can  I  deduct  this  item  as  expense? 

A.  Under  rulings  of  the  Treasury  Department  the  deduction 
for  expense  in  any  one  year  must  not  exceed  the  average 
annual  cost  of  repairs  for  five  years  previous  thereto. 

12 


Q.  If  an  individual  owns  stock  in  a  corporation  and  has  bor- 
rowed the  money  with  which  to  buy  the  stock,  has  he  the 
right  to  deduct  the  interest  on  that  borrowed  money  in  mak- 
ing a  return? 

A.     Yes. 


Question  No.  34. 

Q.  My  salary  is  $1,500  a  year  and  I  have  $1,000  worth  of  stock, 
dividend  payable  at  New  York;  $1,000  bond,  interest  pay- 
able at  New  York,  and  $1,000  bond,  interest  payable  at  Chi- 
cago— the  total  from  all  three  not  being  quite  $150  a  year. 
Will  you  please  advise  me  as  to  a  practical  method  to  pur- 
sue to  avoid  paying  income  tax  on  my  investments,  as  I 
am  well  within  the  $3,000  exemption? 

A.  You  should  fill  in  and  sign  Certificate  1000,  claiming  therein 
your  exemption  under  Paragraph  C  of  the  Statute,  and  at- 
tach the  same  to  your  coupons  when  presenting  them  for 
payment. 


'Question  No.  35. 

Q.  Are  amounts  paid  on  life  insurance  premiums  deductible 
under  the  item  of  expense? 

A.  Where  the  insurance  is  carried  as  a  protection  to  business 
or  for  the  benefit  of  business  the  premiums  paid  on  the  life 
insurance  are  deductible  under  the  item  of  expense.  Tl;e 
test  would  be  whether  or  not  such  insurance  is  payable  to 
a  corporation  or  firm  of  which  the  insured  is  a  member  or 
whether  or  not  it  can  be  clearly  shown  that  such  insurance 
is  carried  for  the  purpose  of  protecting  one's  business  or  as 
a  business  venture. 


Question  No.  36. 

Q.  I  purchased  100  shares  of  stock  in  April,  1913,  at  $100  per 
share,  and  on  December  31st,  1913,  the  market  value  of  the 
stock  is  found  to  have  increased  to  $150  per  share.  Must 
I  include  the  increase  in  value  as  income? 

A.  No,  because  no  income  has  accrued  or  been  realized  thereon 
until  sold. 


Question  No.  37. 

Q.  If  the  profits  in  sale  of  real  estate  are  liable  to  the  income 
tax,  how  do  you  get  at  the  profit  on  a  *4  section  of  land 
purchased  about  thirty-five  years  ago  for  $1,600  and  sold 

13 


March  1st,  1913,  for  $16,000;  $6,000  received  in  cash  and 
a  mortgage  taken  back  for  $10,000? 

You  should  include  in  your  return  1/35  of  the  net  income 
derived  from  the  sale  of  your  land.  From  the  $16,000  re- 
ceived you  may  deduct  the  cost  price,  taxes,  interest  and 
other  expenses  during  the  35  years  that  you  have  held  the 
land,  and  pro-rating  the  profit  from  the  number  of  years 
you  have  held  the  property,  1/35  of  the  net  profit  is  taxable 
as  income  for  the  year  1913. 


Question  No.  38. 

Q.  I  am  a  bachelor  traveling  salesman  and  have  no  permanent 
residence.  My  salary  is  $2,400  per  year  and  commissions 
about  .$1,000  per  year.  Must  I  furnish  a  certificate  claiming 
exemption  and  is  my  employer  entitled  to  deduct  a  tax  of 
one  per  cent  on  the  $400  in  excess  of  the  exemption  allowed 
me? 

A.  Your  employer  can  not  require  you  to  furnish  a  certificate 
claiming  exemption  as  your  fixed  annual  income  does  not 
exceed  $2,400  a  year.  The  tax  on  income  which  is  not 
definite  and  fixed  is  not  deductible  at  the  source.  You 
should  make  your  own  return  and  include  therein  your  in- 
come from  all  sources. 

(T.  D.  1890). 

Income  derived  from  the  following  professions  and  vocations 
come  under  this  head:  Farmers,  merchants,  agents  compensated 
on  the  commission  basis,  lawyers,  doctors,  authors,  inventors, 
and  other  professional  persons  whose  income  is  irregular  and 
indefinite. 

Such  persons  shall  make  personal  return  of  all  their  income, 
provided  their  total  income  from  all  sources  exceeds  $3,000. 
For  example ;  when  a  lawyer  receives  a  retainer  of  $5,000  as  a 
special  fee,  a  deduction  therefrom  shall  not  be  made  by  the 
payer,  but  when  a  lawyer  receives  a  retainer  of  $5,000  per  annum, 
and  the  exemption  claimed  is  $3,000,  $2,000  of  such  income  would 
be  taxed  and  the  tax  retained  at  the  source,  or  if  his  exemption 
claimed  should  be  $4,000,  $1,000  of  such  income  would  be  taxed 
and  the  tax  thereon  withheld  at  the  source. 


Question  No.  39. 

Q.     What  is  the  penalty  for  refusing  or  neglecting  to  file  a  return 
on  or  before  March  1st,  1913. 

A.     The  penalty  for  refusal  or  failure  to  file  a  return  is  not  less 
than  $20  nor  more  than  $1,000.     In  addition  to  fine,  the  tax 

14 


which  may  be  subsequently  assessed  by  the  Collector  must 
also  be  paid. 


Question  No.  40. 
What  is  the  penalty  for  false  or  fraudulent  return? 

A  person  making  a  false  or  fraudulent  return  shall  be  guilty 
of  a  misdemeanor  and  shall  be  fined  not  exceeding  $2,000 
or  imprisonment  not  exceeding  one^  year  or  both  at  the  dis- 
cretion of  the  court  with  the  costs  of  the  prosecution. 


Question  No.  41. 

Q.  When  a  person  is  traveling  for  a  year  or  two  and  is  not 
at  home  to  make  return  of  his  income,  will  he  be  fined  if 
he  collects  all  his  bond  coupons  at  the  end  of,  say,  three 
years? 

A.  If  the  coupons  are  not  presented  for  payment  no  return 
need  be  made  until  they  are  paid 


Question  No.  42. 

I  am  the  owner  of  railroad  and  other  corporation  bonds 
which  contain  a  clause  agreeing  to  pay  any  tax  assessed 
upon  them.  Do  I  have  to  make  any  report  or  return  to  the 
Collector  of  Internal  Revenue  relating  to  the  income  from 
such  bonds? 

When  presenting  the  coupons  for  payment  you  should  sign 
certificate  form  No.  1000  and  disclaim  exemption  therein. 
You  must  include  the  proceeds  in  your  return  as  taxes  de- 
ducted at  the  source,  although  the  corporation  pays  the 
coupons  in  full,  and  you  may  in  such  return  deduct  any 
amount  on  which  the  tax  has  been  paid  at  the  source  in 
ascertaining  your  net  income  although  the  tax  on  the  par- 
ticular amount  was  paid  by  the  corporation. 


Question  No.  43. 

Are  Chicago  improvement  bonds  exempt  from  the  income 
tax? 

Bonds  issued  under  the  authority  of  State  laws  for  the 
purposes  of  street  improvement,  reclamation  or  drainage 
of  a  district  are  exempt  from  deduction  or  payment  of  the 
Federal  Income  Tax.  This  ruling  reverses  the  Treasury 
Decision  No.  1910  dated  September  4th,  1913,  to  the  effect 
that  the  interest  on  such  bonds  is  taxable. 

15 


Muncipal  Bonds. 

Such  bonds  as  are  an  obligation  of  the  municipality  are  payable 
both  principal  and  interest  out  of  the  general  funds  of  the  muni- 
cipality or  out  of  the  funds  derived  from  the  general  assessment 
of  all  property  in  such  municipality. 

The  interest  on  bonds  which  are  issued  for  special  improve- 
ment and  where  the  principal  and  interest  are  both  payable  out 
of  a  special  fund  derived  from  assessment  against  the  abutting 
and  benefited  property,  is,  in  the  opinion  of  this  office,  exempt 
from  the  tax  imposed  by  the  Act  cited. 


Question  No.  44. 

Q.  I  conduct  a  mercantile  business.  By  what  method  shall 
I  ascertain  my  gross'  annual  income  ? 

A.  To  the  amount  of  your  inventory  of  January  1st,  1913 
add  the  amount  of  your  sales  during  the  year  1913  and 
deduct  from  the  total,  amount  of  stock  purchased,  the  result 
is  your  gross  income  for  the  year. 

To  arrive  at  your  taxable  income  you  may  make  the  de- 
ductions allowed  in  Paragraph.  B  of  the  Act  and  to  such 
exemption  or  part  thereof  as  you  may  be  entitled  to  as  pro- 
vided in  Paragraph  C. 


Question  No.  45. 

Q.  Must  a  foreigner  pay  an  income  tax  on  dividends  received 
from  stock  of  a  corporation  doing  business  in  the  United 
States? 

A.  Payment  of  the  normal  tax  of  one  per  cent  by  a  corpora- 
tion on  its  net  earnings  exempts  its  dividends  from  further 
taxation  unless  the  aggregate  of  such  dividends  paid  dur- 
ing the  year  to  the  foreigner  shall  exceed  $20,000,  in  which 
case  the  foreigner  is  subject  to  the  additional  tax. 


Question  No.  46. 

Q.  Must  I  include  as  income  a  stock  dividend  of  a  corporation 
at  the  par  value  of  the  stock  or  the  market  value? 

A.  Stock  dividends  are  exempt  and  are  deductible.  They 
should  be  included  at  their  par  value  when  such  stock  is 
finally  disposed  of,  the  difference  in  the  sale  price  and  the 
par  value  should  either  be  computed  as  income  or  loss. 

1 


Question  No.  47. 

Q.  I  am  in  the  real  estate  business  and  care  for  a  large  number 
of  improved  properties  in  Chicago  belonging  to  resident  and 
foreign  owners.  Suppose  the  net  rental  accruing  from  a 
certain  building  is  $800  per  month. 

A.  Where  the  annual  rental  paid  by  a  tenant  is  in  excess  of 
$3,000  the  tenant  is  required  to  deduct  the  one  per  cent 
normal  tax  on  the  entire  amount  unless  the  owner  or  his 
agent  serves  the  tenant  with  notice  to  the  effect  that  the 
rent  is  exempt,  as  provided  in  Paragraphs  B,  C  and  D  of  the 
Act. 


Question  No.  48. 

Q.     If   I   collect   rents   and   interest   on   mortgages   amounting 
annually  to  $12,000  which  I  remit  to  a  non-resident  foreigner 

(1)  Must  I  obtain  a  license? 

(2)  Must  I  pay  the  normal  tax  on  $12,000? 

A.     No  license  is  required  for  the  collection  of  domestic  items 
within  the  United  States. 

A  non-resident  foreigner  is  entitled  to  the  same  deduc- 
tions as  citizens  of  the  United  States.  A  foreigner  is  not 
entitled  to  an  exemption  of  $3,000  if  single  and  $4,000  if 
married. 

For  the  purpose  of  claiming  such  exemption  when  collect- 
ing coupons  of  corporate  obligations,  the  foreigner  should 
execute  Certificate  Form  No.  1.004 ;  or  if  you  are  the  foreign- 
er's sole  agent  in  this  country  you  may  sign  the  certificate 
for  him  claiming  such  exemption. 


Question  No.  49. 

Q.  Does  the  law  require  that  the  tax  shall  be  withheld  from 
monthly  rental  payable  to  a  trust  company  acting  as  agent 
for  the  landlord?  Must  the  tenant  withhold  the  normal  tax 
of  one  per  cent  from  the  amount  of  the  payments? 

A.  When  the  amount  payable  during  the  year  is  fixed  and 
certain,  the  normal  tax  of  one  per  cent  should  be  withheld 
when  the  aggregate  amount  paid  exceeds  $3,000,  unless  the 
landlord  or  his  agent  shall  claim  exemption  under  Para- 
graph C  of  the  Income  Tax  Statute  which  he  may  do  at 
any  time  prior  to  January  29th  of  the  succeeding  year  by 
filing  the  prescribed  Certificate  Form  No.  1007  with  the 
person  withholding  the  tax.  If  the  deduction  is  claimed 
on  account  of  expense  or  other  items  allowed  under  Para- 

17 


graph  B  of  the  Statute,  the  landlord  or  his  agent  must  claim 
deduction  by  riling  with  the  tenant  Certificate  Form  No. 
1008, 


Question  No.  50. 

Q.  I  collect  rentals  from  various  properties  in  Chicago,  the 
aggregate  of  which  exceeds  $3,000  per  year.  Must  I  deduct 
one  per  cent  on  the  excess  before  remitting  to  the  owner? 

A.  No.  The  one  per  cent  deduction  is  required  to  be  made  only 
at  the  source;  the  source  being  defined  by  the  Treasury 
Department  as  the  place  where  the  income  originates. 


Question  No.  51. 
Q.     What  return  must  guardians,  trustees  and  fiduciaries  make? 

A.  Guardians,  trustees,  and  others  acting  in  any  fiduciary 
capacity  must  make  an  annual  return  if  the  annual  interest 
of  any  beneficiary  exceeds  $3,000  in  which  case  a  list  return 
must  also  be  made  containing  the  name  and  address  of 
each  beneficiary  and  the  amount  to  which  each  is  entitled. 

(  T.  D.  1929.  ) 

Collecting  Agent's  certificate  to  be  substituted  for  certificate  of 
owners  when  said  owners  are  fiduciaries,  not  claiming  exemp- 
tion at  the  source. 

Subject  to  the  provisions  of  the  Regulations  in  Treasury  De- 
cision 1903,  (page  6)  dated  November  28,  1913,  collecting  agents 
may  substitute  Form  1019a,  properly  filled  in  and  numbered,  for 
the  certificate  of  the  owner  on  Form  1019  (page  80). 

When  collecting  agents  substitute  their  own  certificate  in 
lieu  of  owner's  certificate  on  Form  1019,  said  substitute  certifi- 
cate shall  be  Form  1019a. 


Question  No.  52. 

Q.  Will  the  executor  of  an  estate  have  to  pay  a  tax  on  the  in- 
come of  said  estate  over  $13,000?  The  income  is  divided 
among  several  beneficiaries  none  of  whom  receives  over 
$1,000. 

A.  Where  no  one  of  the  beneficiaries  receives  in  excess  of 
$3,000  the  tax  is  not  deductible  at  the  source  by  the  execu- 
tor, notwithstanding  the  fact  that  the  aggregate  amount  paid 
to  all  the  beneficiaries  exceeds  $3,000.  Executor  may  obtain 
exemption  from  deduction  of  the  tax  at  the  source  by  filing 
certificate  1015  (see  page  68). 

II 


Question  No.  98. 

Q.  As  Trustee  under  a  former  Will  I  am  paying  each  year  to 
a  beneficiary  $10,000.  Is  this  subject  to  tax? 

A.  Money  or  value  of  property  acquired  by  gift,  bequest,  de- 
vise or  descent  is  exempt  from  taxation  under  the  Federal 
Income  Tax  Law. 


Question  No.  54. 

Q.  I  received  during  the  year  a  legacy  of  $5,000  under  the  Will 
of  my  aunt  and  an  annuity  of  $2,000  from  my  father's  estate. 
Must  I  include  this  amount  in  my  return? 

A.  Gifts  are  not  taxable  under  the  statute  and  you  will  not  have 
to  include  the  $7,000  therein,  but  the  income  from  the  said 
$7,000  must  be  included  in  your  return.  Unless  the  sum 
of  the  annuity  from  your  father's  estate  and  your  income 
from  other  sources  exceeds  $3,000  vou  need  make  no  return. 


Question  No.  55. 

Q.  The  Income  Tax  Law  was  enacted  October  3rd,  1913  and 
took  effect  as  of  March  1st,  1913.  Why  is  this  law  not  ex 
post  facto? 

A.  As  the  Sixteenth  Amendment  was  ratified  by  the  required 
majority  of  the  legislatures  of  the  several  States  on  March 
1st,  1913,  the  power  to  tax  under  this  Amendment  according 
to  statutory  construction  dates  from  the  ratifying  of  the 
Amendment.  The  limitations  of  the  taxing  power  of  the 
Government  are  limitless.  A  retroactive  law  is  not  neces- 
sarily ex  post  facto.  An  ex  post  facto  law  relates  to  penal- 
ties for  crime.  An  ex  post  facto  law  is  one  which  makes 
criminal  an  act  committed  prior  to  the  enactment  of  the 
law  or  which  increases  the  punishment  subsequent  to  the 
commission  of  the  crime,  or  one  which  requires  less  or  dif- 
ferent testimony  for  conviction  of  an  offense  than  that  re- 
quired at  the  time  of  its  commission. 


Question  No.  56. 
Q.     When  must  a  corporation  file  a  return? 

A.  Every  corporation,  except  certain  trade,  civic  and  charitable 
associations  must  file  a  return  of  income,  irrespective  of  the 
amount. 

19 


(T.  D.  1933). 

Mutual  Telephone  Companies  and  Mutual  Insurance  Companies. 

You  are  informed  that  under  the  provisions  of  the  act  above 
cited,  every  corporation,  joint  stock  company,  any  and  every 
insurance  company,  no  matter  how  created  or  organized,  is  sub- 
ject to  the  income  tax  and  will  be  required  to  make  returns  of 
annual  net  income,  except  such  as  are  specifically  enumerated 
in  the  act  as  exempt  from  its  provisions.  In  the  list  of  those  so 
enumerated  as  exempt  do  not  appear  mutual  telephone  com- 
panies or  similar  organizations. 

Since  under  this  act  no  exemption  is  provided,  either  express 
or  implied,  for  mutual  telephone  and  like  companies,  and  liability 
is  not  dependent  upon  whether  or  not  the  corporation  is  organ- 
ized for  profit,  it  is  held  that  all  corporations  not  specifically 
enumerated  as  exempt  will  be  required  to  make  returns  of  the 
net  income  returned. 

This  ruling  will  comprehend  all  telephone  companies,  local 
insurance  companies,  and  like  corporations  whether  or  not  they 
are  organized  primarily  for  the  mutual  benefit  of  their  members. 


Question  No.  57. 
Q.     What  period  must  a  corporation's  return  cover? 

A.  A  corporation's  return  ordinarily  covers  the  period  from 
March  1st,  1913,  to  December  31st,  .1913,  unless  the  corpora- 
tion shall  thirty  days  before  March  1st,  1914  give  notice  to 
the  Collector  of  Internal  Revenue  that  its  return  shall  be 
made  for  a  fiscal  year  and  designate  the  termination  of  such 
fiscal  year.  Ordinarily  corporate  returns  must  be  made  on 
or  before  March  1st,  1913,  but  when  a  fiscal  year  has  been 
•  designated  the  corporation  must  make  its  return  within 
sixty  days  after  the  day  designated  as  the  close  of  the  fiscal 
year  and  pay  the  tax  assessed  thereon  within  one  hundred 
and  eighty  days  after  the  close  of  such  designated  fiscal 
year. 


Question  No.  58. 

Q.  I  am  the  bookkeeper  for  a  firm  that  donates  quite  a  sum  to 
its  employes  as  Christmas  presents.  The  proprietor  also 
has  an  arrangement  with  several  of  the  employes  to  pay 
them  a  certain  perecentage  of  the  profits.  Can  the  pro- 
prietor enter  these  amounts  thus  paid  as  expenses  of  the 
business  and  thereby  pay  only  the  income  tax  on  the  net 
amount  actually  realized  in  his  business.  The  proprietor  is 
the  sole  owner. 

20 


A.  The  gifts  which  the  proprietor  makes  to  the  employes  at 
Christmas  or  other  times  are  not  deductible  as  they  are  not 
an  expense  of  the  business.  The  amount  which  the  pro- 
prietor has  agreed  and  does  actually  pay  to  the  employes 
is  equivalent  to  wages.  The  fact  that  it  is  computed  on  a 
certain  perecentage  of  the  profits  does  not  alter  the  fact 
that  it  is  an  actual  expense  of  the  business  and  is,  therefore, 
deductible  as  such. 

Commissions  paid  to  salesman  in  stock  may  be  deducted 
as  expense  if  so  charged  on  books  at  the  actual  value  of 
such  stock. 

Donations  made  for  purposes  connected  with  the  opera- 
tion of  the  property  when  limited  to  charitable  institutions, 
hospitals  or  educational  institutions  conducted  for  the  bene- 
fit of  its  employees  or  their  dependents  shall  be  a  proper 
deduction  for  ordinary  and  necessary  expenses. 


Question  No.  59. 

Q.  If  a  corporation  shows  only  a  profit  of  $1,000  in  all  its 
transactions  will  it  be  obliged  to  pay  the  one  per  cent  nor- 
mal tax  on  such  net  earnings? 


A.     Yes. 


Question  No.  60. 


Q.     What  is  the  rate  on  net  income  of  corporations?     Must  a 
corporation  pay  the  additional  tax  if  it  makes  over  $20,000? 

A.     No.     The  additional  tax  does  not  apply  to  corporations. 


Question  No.  61. 

Q.     Has  a  corporation  an  exemption  of  $3,000  or  $4,000  the  same 
as  an  individual? 

A.     A  corporation  is  allowed  no  exemption  whatever  under  the 
Income  Tax  Statute. 


Question  No.  62. 

Q.  I  have  an  income  of  about  $2,500  and  own  four  bonds  of 
$1,500  each.  When  I  present  the  coupons  to  the  bank  for 
payment,  must  I  make  a  statement?  Where  do  such  Cer- 
tificates go?  Are  such  Certificates  sent  to  the  Revenue 
Officials  or  to  the  corporation  who  is  obligated  to  pay  the 
coupons  ? 

21 


When  presenting  your  coupons  for  payment  you  must  either 
claim  or  disclaim  exemption  by  filling  in  and  signing  form 
1000.  The  bank  then  fills  out  form  1000A  and  attaches  it  to 
your  coupons  and  sends  it  to  the  corporation  or  its  paying 
agent,  which,  in  turn,  sends  Certificate  1000A  to  the  Col- 
lector of  Internal  Revenue  with  its  returns.  The  bank  re- 
tains your  original  Certificate  1000  and  sends  it  together  with 
its  return  to  the  Collector  of  Internal  Revenue  for  the  district 
in  which  the  bank  has  its  principal  place  of  business. 


Question  No.  63. 

Q.  An  outlying  bank  makes  mortgages  and  sells  them  to  cus- 
tomers, the  bank  collecting  trie  interest.  Some  of  these 
loans  are  made  in  the  form  of  real  estate  bonds.  Is  it  neces- 
sary for  the  bank  or  the  mortgagor,  who  is  an  individual,  to 
withhold  the  normal  tax  of  one  per  cent  where  the  annual 
interest  on  separate  mortgages  is  less  than  $3,000?  The 
aggregate  amount  collected  by  the  bank  is  approximately 
$18,000. 

A.  No  tax  is  deductible  in  the  above  case.  The  provision  for 
deduction  of  the  tax  at  the  source  on  amounts  less  than 
$3,000  applies  only  to  corporations.  In  this  case  the  mort- 
gagor being  an  individual,  the  mortgagee  is  entitled  to  pay- 
ment without  deduction.  The  bank  is  not  authorized  to  with- 
hold the  tax  on  the  aggregate  amount  of  such  interest  pay- 
ments as  the  bank  is  not  "the  place  where  the  income 
originates." 


Question  No.  64. 

Q.  How  must  a  corporation  proceed  in  the  selection  of  a  fiscal 
year  for  making  this  return?  When  must  notice  be  given  to 
the  Collector  of  Internal  Revenue  of  the  termination  of  such 
fiscal  year? 


(T.  D.  1897.) 

A.  The  Federal  income  tax  law  (sec.  2,  act  of  Oct.  3,  1913) 
authorizes  corporations,  joint  stock  companies,  etc.,  under 
certain  conditions  to  make  their  returns  on  the  basis  of  an 
established  "fiscal  year,"  or  consecutive  12-months'  period, 
which  may  be  other  than  the  calendar  year. 

Pursuant  to  this  provision,  the  following  instructions  are 
.issued  for  the  guidance  of  collectors  and  other  interested 
parties : 

22 


Any  corporation,  joint  stock  company  or  association,  or 
any  insurance  company,  subject  to  the  tax  imposed  by  this 
act,  may,  at  its  option,  have  the  tax  payable  by  it  computed 
upon  the  basis  of.  the  net  income  received  (accrued)  from 
all  sources  during  its  fiscal  year,  provided  that  it  shall  desig- 
nate the  last  day  of  the  month  selected  as  the  month  in 
which  its  fiscal  year  shall  close  as  the  day  of  the  closing  of  its 
fiscal  year,  and  shall,  not  less  than  thirty  days  prior  to 
the  date  upon  which  its  annual  return  is  to  be  filed,  give 
notice,  in  writing,  to  the  collector  of  internal  revenue  of  the 
day  it  has  thus  designated  as  the  closing  of  such  fiscal  year. 

In  pursuance  of  this  provision,  a  corporation  or  like  organ- 
ization subject  to  this  tax  may,  for  example,  designate  the 
30th  day  of  September  as  the  day  for  the  closing  of  its  fiscal 
year,  whereupon  its  return  of  annual  net  income  shall  be 
filed  with  the  Collector  of  internal  revenue  of  the  district 
in  which  its  principal  place  of  business  is  located  not  later 
than  60  days  after  the  close  of  its  said  proposed  fiscal  year: 
that  is  to  say  on  or  before  the  29th  day  of  November  next 
succeeding. 

The  date  of  the  closing  of  the  fiscal  year  having  been  desig- 
nated, notice  thereof  must  be  given  to  the  collector  not  less 
than  thirty  days  prior  to  the  last  day  of  such  sixty-day 
period.  In  the  case  just  instanced,  the  notice  must  be  given 
not  later  than  October  31. 

If  such  designation  (Sept.  30,  1913,)  had  been  made  and 
notice  given,  as  hereinbefore  indicated,  as  to  the  closing 
of  the  fiscal  year  1913,  the  corporation  would  be  authorized 
to  make  its  return  and  have  the  tax  payable  by  it  computed 
upon  the  basis  of  the  net  income  received  (accrued)  by  it 
during  the  period  from  January  1  to  September  30,  both 
dates  inclusive. 

In  the  absence  of  such  designation  and  notice  of  the  clos- 
ing of  the  fiscal  year  corporations  and  like  organizations 
subject  to  this  tax  will  be  required  to  make  their  returns  and 
have  the  tax  computed  upon  the  basis  of  the  net  income  for 
the  calendar  year. 

Collectors  of  internal  revenue  receiving  notices  of  the 
selection  and  designation  of  the  "fiscal  years,"  as  above  in- 
dicated, will  make  a  record  of  the  same,  recording  (a)  the 
name  of  the  corporation,  or  like  organization,  (b)  the  date 
when  the  notice  was  given,  (c)  the  day  designated  for  the 
closing  of  the  fiscal  year,  and  (d)  the  date  when  the  return 
under  such  designation  must  be  filed,  which  must  be,  as 
above  stated,  not  later  than  the  last  day  of  the  60-day  period 
next  following  the  day  designated  as  the  close  of  the  fiscal 
year. 

If  it  shall  appear  that  for  the  current  year  the  notice  was 
given  within  the  prescribed  time — that  is,  within  30  days  of 

23 


the  last  day  of  the  60-day  period — the  1913  return  may  be 
made  as  of  the  fiscal  year  so  established:  otherwise  it  will 
be  m  ade  on  the  basis  of  the  calendar  year  until  such  time  as 
the  designation  shall  be  duly  made  and  notice  thereof  proper- 
ly given. 

The  designation  and  notice  can  not  be  retroactive:  that 
is  to  say,  if  a  corporation  now  designates  April  30,  1914,  as 
the  date  of  the  closing  of  its  fiscal  year  and  gives  notice  of 
such  designation,  it  would  not  be  authorized  to  make  a 
return  for  the  4  months  ended  April  30,  1913,  and  then  for 
the  fbcal.year  ended  April  30,  1914,  nor  would  it  be  author- 
ized to  make  one  return  covering  the  entire  16  months  ended 
April  30,  1914.  In  the  case  of  such  corporation  the  return 
for  the  current  year  must  be  made  for  the  calendar  year 
ended  December  31,  1913,  and  then,  assuming  that  designa- 
tion and  notice  had  been  properly  made  and  given,  it  may 
make  a  return  for  the  4  months  ended  April  30,  1914,  and 
thereafter  the  return  will  be  made  on  the  basis  of  the  fiscal 
year  so  established. 

In  all  cases  where  a  fiscal  year  is  not  established  as  above 
prescribed  returns  must  be  made  on  the  basis  of  the  calen- 
dar year,  in  which  case  such  returns  must  be  filed  on  or 
before  the  1st  day  of  March  next  succeeding  such  calendar 
year. 

Such  returns,  for  the  period  covered,  must  be  true  and 
accurate,  definite  and  complete,  and,  in  as  far  as  consistent 
with  the  provisions  of  the  law,  must  conform  to  the  showing 
made  by  the  books  of  the  company,  and  must  be  verified 
under  oath  of  affirmation  of  its  president  or  other  principal 
officers,  and  its  treasurer  or  assistant  treasurer:  that  is  to 
say,  by  two  different  persons  acting  in  the  official  capacity 
indicated. 

If  it  shall  appear  in  any  case  that  returns  have  been  made 
to  the  collector  on  the  basis  of  a  fiscal  year  not  designated 
as  above  indicated,  the  corporations  making  such  returns 
will  be  advised  that  such  returns  can  not  be  accepted,  but 
must  be  made  to  cover  the  business  of  the  calendar  year. .  . 

Returns  made  under  this  act  pursuant  to  these  instructions 
must  be  made  on  the  new  forms  prescribed  by  this  depart- 
ment. 

Question  No.  65. 

Q.  Is  a  bank  or  collection  agency  which  holds  for  collection 
notes  reporting  annual  interest  on  farm  mortgages  in  amount 
less  than  $3,000  required  to  deduct  one  per  cent  of  the  tax 
from  the  face  of  the  coupons  if  the  owner  does  not  claim 
exemption  thereon? 

A.  Deductions  of  the  tax  at  the  source  on  bonds,  mortgages 
and  trust  deeds  only  applies  to  the  obligations  of  corpora- 

24 


tion.    joint-stock    companies    or    associations,    unless    the 
amount  of  such  payment  is  in  excess  of  $3,000. 

Question  No.  66. 

Q.  If  a  corporation  leases  a  building  for  $10,000  per  annum 
and  re-lets  a  portion  of  said  premises  to  another  corporation 
at  $6,000  per  annum,  is  the  second  corporation  bound  to 
deduct  one  per  cent  from  its  rental? 

A.  No.  The  provision  requiring  deduction  of  the  tax  at  the 
source  applies  only  to  individuals  and  not  to  corporations. 


Question  No.  67. 

Q.  The  bank  with  which  I  am  connected  owns  some  bonds  of 
corporations  which  provide  that  no  part  of  the  principal  or 
interest  shall  be  deducted  for  any  tax  or  taxes  imposed 
thereon  by  the  United  States,  State,  County  or  Municipality. 
If  these  corporations  pay  the  tax,  must  we  return  the  in- 
terest and  claim  deduction  thereon  under  the  head  of  amount 
on  which  tax  has  been  deducted  at  the  source? 

A.  By  disclaiming  exemption  in  your  Certificate  1000  when  pre- 
senting the  coupons  for  payment,  you  can  return  the  amount  of  such 
coupons  under  the  head  of  income  on  which  the  tax  has  been  deducted 
at  the  source,  although  the  corporation  pays  the  tax  and  interest  in  full* 


Question  No.  68. 

Q.  Are  dividends  received  from  the  X  corporation  by  the  Y 
corporation  holding  stock  therein,  taxable  as  part  of  the 
net  earnings  of  the  Y  corporation  to  whom  such  dividends 
are  paid? 

A.  The  Y  corporation  receiving  dividends  from  the  X  corpora- 
tion must  pay  the  normal  tax  of  one  per  cent  thereon  as  part 
of  its  net  earnings.  In  case  of  holding  companies  this  will 
amount  to  double  taxation.  Dividends  are  exempt  from 
the  normal  tax  only  when  received  by  an  individual. 


Question  No.  69. 

Q.  We  are  incorporated  with  three  stockholders,  all  officers 
of  the  company.  One  is  paid  a  salary  of  $3,000  a  year,  and 
two  $5,000  and  $10,000,  respectively,  on  preferred  stock. 
If  our  business  should  show  a  paper  profit  of  $10,000,  which 
is,  in  book  accounts,  merchandise,  and,  say,  $1,000  in  bank, 
would  this  company  have  to  pay  a  tax  on  the  $10,000,  we 
declaring  no  dividends? 

25 


A.  The  salaries  of  the  officers  when  taken  in  lieu  of  dividends, 
are  exempt.  After  your  corporation  pays  the  normal  tax  of 
one  per  cent  on  its  net  earnings  the  amounts  paid  as  divi- 
dends are  exempt  from  further  tax  unless  the  amount  of  such 
dividends  received  by  a  person  exceeds  $20,000,  then  it  is 
subject  to  the  additional  tax  as  provided  in  Subdivision  2 
of  Paragraph  A  of  the  Statute. 


Question  No.  70. 

Q.  Are  corporations  allowed  exemption  of  that  portion  of  their 
income  derived  from  bonds  of  the  United  States,  counties, 
cities  or  any  political  subdivision  thereof? 

A.  Bonds  of  the  United  States  or  any  political  subdivision 
thereof  are  wholly  exempt. 


Question  No.  71. 

Q.  Are  partnerships  allowed  to  deduct  the  expense  of  doing 
business  ? 

A.  A  partnership  may  claim  exemption  from  deduction  of  the 
tax  at  the  source  and  for  that  purpose  should  attach  to 
coupons  of  corporate  obligations  when  presenting  them  for 
payment,  certificate  form  No.  1003. 


(T.  D.  1905.) 

Inasmuch  as  individual  members  of  a  partnership  are  liable  for 
income  tax  upon  their  respective  interest  in  the  net  earnings  of 
said  partnership  and  are  required  to  include  said  net  earnings 
in  their  personal  returns,  the  partnership  may  file  with  the  debtor 
corporation,  or  with  a  withholding  agent,  a  notice,  signed  in  the 
name  of  the  partnership,  by  a  member  thereof,  claiming  a  deduc- 
tion of  a  specific  amount  on  account  of  legitimate  expenses  (not 
including  the  personal  or  living  expenses  of  the  partners)  in- 
curred in  conducting  the  business  of  said  partnership,  and,  upon 
receipt  of  said  notice,  said  withholding  agent  shall  not  withhold, 
and  shall  not  be  held  liable  for,  the  normal  tax  on  the  amount 
of  income  equal  to  the  amount  of  deduction  claimed  in  said 
notice,  but  in  no  event  shall  the  total  of  the  amounts  claimed, 
as  provided  herein,  be  in  excess  of  the  total  amount  of  the 
actual  legitimate  annual  expenses  incurred  by  said  partnership 
in  the  conduct  of  its  business.  Application  for  such  deduction 
shall  be  made  on  Form  1011. 

Partnerships  are  not  subject  as  partnerships  to  the  income 
tax  and  are  required  to  make  statement  of  their  income  and 
earnings  as  partnerships  only  when  requested  to  do  so  by  the 
Commissioner  of  Internal  Revenue  or  the  collector  of  internal 

26 


revenue  for  the  district  in  which  said  partnership  has  its  prin- 
cipal place  of  business,  and  when  such  a  statement  is  required, 
as  aforesaid,  the  said  statement  shall  give  a  complete  and  cor- 
rect report  of  the  gross  income  of  the  said  partnership  and  also 
a  complete  account  of  the  actual  legitimate  annual  expenses  of 
conducting  the  business  of  said  partnership  (not  including  living 
and  personal  expense  of  the  partners)  and  the  net  profits  and 
the  name  and  address  of  each  of  the  members  of  said  partner- 
ship and  their  respective  interest  in  the  net  profits  thus  re- 
ported. 

The  net  annual  income  of  a  partnership,  when  apportioned 
and  paid  to  the  members  thereof,  shall  be  returned  by  each  indi- 
vidual partner  receiving  same,  in  his  annual  return  of  net  income, 
and  the  tax  shall  be  paid  thereon  by  said  individual  partner,  as 
required  by  law. 

When  the  annual  income  of  a  partnership  is  not  distributed 
and  paid  to  the  members  thereof,  the  respective  interest  of  each 
member  in  said  profits  shall  be  ascertained,  and  the  individuals 
entitled  thereto  shall  include  the  said  amount  in  their  annual 
return  as  part  of  their  gross  income,  the  same  as  if  said  profits 
had  been  distributed  and  paid  to  them. 

Undivided  annual  net  income  of  partnerships  thus  returned 
by  the  individual  members  thereof,  upon  which  the  tax  shall 
have  been  paid,  shall  not,  when  said  profits  are  actually  dis- 
tributed and  paid  to  the  partners,  be  again  included  in  their 
annual  return  as  a  part  of  their  gross  income. 

Foreign  partnerships  or  firms,  all  the  members  of  which  are 
both  citizens  or  subjects  and  residents  of  a  foreign  country, 
which  are  the  owners  of  bonds  and  mortgages  or  deeds  of  trust 
or  other  similar  obligations,  including  equipment  trust  agree- 
ments, receivers'  certificates,  and  stocks,  of  corporations,  joint- 
stock  companies  or  associations  and  insurance  companies,  or- 
ganized or  doing  business  in  the  United  States,  may  file  with  the 
debtor  or  withholding  agent,  with  their  coupons  or  orders  for 
registered  interest,  or  orders  for  other  income  derived  from 
property  or  investments  in  the  United  States,  certificate  and 
notice  of  ownership,  setting  forth  the  facts  as  to  non-residence 
and  alienship,  and  the  debtor  or  withholding  agent  shall  not 
withhold  any  part  of  their  said  income. 

Where  a  foreign  partnership  or  firm  is  composed  of  both  non- 
resident foreigners  and  citizens  of  the  United  States,  or  for- 
eigners resident  in  the  United  States  or  its  possessions,  the 
certificate  of  ownership  shall  show  this  fact,  and  the  name  and 
legal  address  of  each  member  of  said  partnership,  who  is  a 
citizen  of  the  United  States  or  who  is  a  foreigner  residing  in 
the  United  States  or  its  possessions  shall  be  given  on  the  said 
certificate,  and  no  part  of  said  income  shall  be  withheld  by  the 
paying  agent. 

27 


Question  No.  72. 

Q.  Ten  years  ago  I  bought  a  lot  for  $500  cash.  I  paid  2*/2  per 
cent  commission  to  obtain  the  money  and  have  ever  since 
paid  6  per  cent  interest  on  the  loan,  also  taxes.  Three 
months  ago  I  sold  the  lot  for  $1,000.  In  computing  my 
profit  may  I  deduct  6  per  cent  interest  compounded  for  the 
ten  years? 

A.     Yes. 


Question  No.  73. 

Q.  If  I  had  paid  cash  for  a  lot  ten  years  ago,  would  I  be  per- 
mitted to  deduct  6  per  cent  compounded  interest  for  that 
period  in  computing  my  profit? 

A.  Six  per  cent  may  be  deducted  as  you  are  entitled  to  a  rea- 
sonable earning"  on  the  money  invested  during  the  period. 
The  net  profit  from  the  sale  should  be  apportioned  over  the 
number  of  years  and  1/10  of  the  amount  report  as  income 
for  the  year  1913. 


Question  No.  74. 

Q.  Will  the  penalties  on  the  income  tax  law  be  enforced 
against  persons  who  make  erroneous  return  by  reason  of 
the  fact  that  they  do  not  properly  understand  the  law? 

A.  If  a  person  makes  a  true  statement  of  what  he  believes  the 
Government  desires,  without  any  intention  of  evading  the 
law  no  penalty  will  be  incurred. 


Question  No.  75. 

Q.  I  sold  a  piece  of  property  under  contract  (not  recorded) 
seven  years  ago  and  deeded  the  same  to  the  buyer  July  1, 
1913,  when  he  paid  the  balance  due  me  in  cash.  My  total 
profit  was  $400.  Must  I  include  this  amount  in  my  return 
for  the  year  1913? 

A.  My  personal  opinion  is  that  this  amount  is  not  taxable  as 
income  as  it  was  due  and  payable  under  the  terms  of  the 
contract  prior  to  the  enactment  of  the  Federal  Income  Tax 
Law,  but  according  to  the  ruling  of  the  Treasury  Depart- 
ment all  profits  accruing  to  a  person  during-  the  taxable 

28 


period  are  taxable,  and  the  Internal  Revenue  Officials  have 
defined  "accruing"  to  mean  not  the  process  of  accruing,  but 
"having  arrived  at  an  accrued  state" — being  due  and  pay- 
able within  the  taxable  year,  therefore  until  this  question 
is  passed  on  by  a  court  of  competent  jurisdiction,  you  will 
have  to  include  1/7  of  the  $400  profit  as  income  for  the  year 
1913. 


Question  No.  76. 

Q.  Some  years  ago  I  bought  a  certain  number  of  shares  of 
Chicago  &  Eastern  Illinois  preferred  at  120.  About  June 
1st,  of  this  year  dividend  payments  were  discontinued  and 
the  road  went  into  the  hands  of  a  receiver.  My  stock  is 
deposited  with  a  committee  who  are  trying  to  save  what- 
ever possible  out  of  the  wreck,  but  is  not  salable  at  pres- 
ent. I  am  sure  to  make  quite  a  loss  on  this  stock.  Under 
the  most  favorable  circumstances  it  certainly  could  not  pay 
out  more  than  par  and  the  chances  are  that  not  that  much 
will  be  finally  realized.  In  figuring  my  income  tax  should 
I  make  a  deduction  from  my  income  for  the  last  ten  months 
of  1913  on  account  of  the  loss  on  this  stock,  and  if  so,  how 
should  I  arrive  at  the  proper  amount?  Would  it  be  better 
to  wait  until  the  matter  is  finally  closed  up  and  I  either  sell 
rny  shares  or  receive  other  shares  in  place  of  them  and  then 
figure  the  actual  loss  and  take  it  out  of  the  year's  income 
in  which  the  final  transaction  occurs? 

A.  If  this  stock  was  worthless  or  depreciated  on  March  1, 
1913.  you  are  not  entitled  to  deduct  the  purchase  price  as 
a  loss.  The  only  amount  you  can  deduct  as  a  loss  is  the 
difference  between  the  value  of  the  stock  on  March  1, 
1913,  and  the  value  on  December  31,  1913.  Of  course  if 
you  receive  other  stock  at  a  future  time,  the  value  of  the 
stock  will  be  income  for  the  year  in  which  you  receive  the 
same. 


Question  No.  77. 

Q.  If  a  person  buys  lots  at  a  tax  sale,  is  the  interest  or  income 
from  said  certificate  subject  to  the  U.  S.  Income  Tax? 

A.  Tax  certificates  are  exempt  from  taxation  in  the  State  of 
Illinois.  As  the  property  is  sold  because  of  the  failure  to 
pay  an  obligation  due  to  a  state,  therefore  the  certificate 
and  interest  accruing  thereunder  is  exempt  from  taxation 
by  the  Federal  Government. 

29 


Question  No.  78. 

Q.  I  have  six  tenants  in  one  building  whose  monthly  rents  ar« 
$175,  $200,  $300,  $350,  $400  and  $450  each.  Are  they  re- 
quired under  the  law  to  deduct  and  withhold  hereafter  from 
me  each  month  1  per  cent  of  these  amounts  which  their 
leases  require  them  to  pay  me  in  full,  monthly,  in  advance, 
first  of  each  month?  If  they  fail  to  account  to  the  govern- 
ment for  this  1  per  cent,  does  it  not  release  me,  and  why 
should  I  be  required  to  schedule  these  rents  when  the  tax 
is  paid  by  them? 

A.  Unless  the  aggregate  amount  of  money  paid  to  you  by  a 
tenant  is  in  excess  of  $3,000  he  has  no  right  to  withhold  the 
1  per  cent  tax  at  the  source.  But  if  the  amount  paid  is  in 
excess  of  $3,000  you  may  give  any  one  of  them  notice  of 
your  individual  exemption  and  they  will  then  withhold  the 
tax  only  on  the  amount  in  excess  of  such  exemption.  Al- 
though the  tax  may  be  withheld  at  the  source  you  must  in- 
clude the  amount  in  the  report  of  your  net  income  and  de- 
duct the  amount  on  which  the  tax  has  been  paid  at  the 
source.  Take  for  example:  Suppose  Charles  Smith,  a  mar- 
ried man,  whose  wife  lives  with  him,  expends  the  follow- 
ing sums  during  the  year : 

Living  expenses  (not  deductible) $10,000 

Interest  on  personal  notes  and  obligations 3,000 

Interest  on  mortgages  owing  by  Mr.  Smith 2,000 

Taxes  on  property  owned  by  Mr.  Smith '  1,000 

Suppose  one  building,  worth  $5,000,  burns  down,  cov- 
ered by  $3,000  insurance,  the  loss,  which  is  de- 
ductible, amounts  to  2,000 

Depreciation  on  properties  owned  by  Mr.  Smith.  ....      6,000 
Repairs    and    maintenance    expenses 10,000 

Totals    $34,000 

Mr.  Charles  Smith  would  ascertain  his  net  income  and  make 
his  return  as  follows : 

Gross  Income. 

Salary  as  president  and  treasurer  of  the  Smith  Manu- 
facturing Company    $25,000 

Rents  from  buildings  owned  by  Charles  Smith 20,000 

Dividends   from   Smith   Manufacturing   Company...    12.000 
Interest  on   Cook  county  bonds 5,000 

Total  gross  income   $62,000 


30 


Deductions  from  Grosa  Income. 

Interest  on  personal  notes  and  obligations.  .$  3,000 
Interest  on  mortgages  owing  by  Mr.  Smith. .  2,000 
Taxes  on  property  owned  by  Mr.  Smith. .  .  .  1,000 

Loss  by  fire 2,000 

Depreciation    on    properties    owned    by    Mr. 

Smith    6,000 

Repairs   and   maintenance   expense 10,000 

Dividends  of  Smith  Manufacturing  Com- 
pany, on  which  tax  of  1  per  cent  was 
paid  on  net  earnings  of  corporation. .  . .  12,000 
Salary  of  Charles  Smith  as  president  and 
treasurer  of  Smith  Manufacturing  Com- 
pany, on  which  tax  was  deducted  at 

source 10,000 

Interest  on  Cook  county  bond 5,000 

Total $51,000 

Personal  exemption  of  Mr.  Smith 4,000 


Total  ' $55,000  $55,000 


Total  net  income  of  Mr.  Smith,  on  which  he 

would  pay  tax   $  7,000 

Therefore,  the  normal  tax  of  1  per  cent,  $70,  is  the  amount 
Mr.  Smith  will  have  to  pay  to  the  collector  of  internal  rev- 
enue. 


Question  No.  79. 

Q.  Is  money  made  by  horse  racing  or  gambling  taxable  as 
income? 

A.  In  the  State  of  Illinois  money  made  or  won  by  horse  rac- 
ing or  gambling  is  illegal.  Where  the  State  Law  prohibits 
certain  acts,  money  earned  by  such  illegal  practices  is  not 
subject  to  the  Federal  Income  Tax  Law,  but  in  States 
where  horse  racing  and  gambling  is  a  legitimate  practice 
money  derived  from  such  source  is  taxable  as  Income  under 
the  provisions  of  the  Federal  Income  Tax  Statute. 


Question  No.  80. 

Q.  I  have  given  corporation  bonds  aggregating  $100,000,  to  a 
Church.  The  Trustees  of  the  Church  have  placed  the  bonds 
in  Trust  with  the  understanding  that  the  interest  on  them 

31 


shall  be  paid  to  me  during  my  life  time  and  upon  my  death 
the  bonds  are  to  become  the  property  of  the  Church.  As 
property  of  a  religious  institution  is  exempt  under  the  In- 
come Tax  Law,  do  I  have  to  pay  tax  on  the  earnings  of 
such  property  paid  to  me  during  my  life  time? 

A.  Gifts  are  not  taxable  under  the  Income  Tax  Law,  but  the 
earnings,  or  income  from  a  gift  is  taxable,  as  the  interest 
accruing  from  the  bonds  constitutes  part  of  your  income  it 
is  taxable. 


Question  No.  81. 
Q.     Are  limited  partnerships  subject  to  Income  Tax? 

A.  Limited  partnerships  are  considered  under  the  same  head 
as  corporations  and  must  make  the  same  return  and  are 
subject  to  the  same  provisions  of  the  law  as  applied  to 
corporations. 


32 


DEDUCTION  OF  THE  TAX  AT  THE  SOURCE 

BY 

BANKING  INSTITUTIONS,    TRUST    COMPANIES    AND 
CORPORATIONS. 

Paragraph  E  (E-19)  of  the  Income  Tax  Law  imposes  an  ob- 
ligation upon  Corporations,  Banks,  Trust  Companies  and  As- 
sociations to  deduct  the  Normal  Tax  of  1  per  cent  and  imposes 
a  liability  for  the  payment  of  such  tax  to  the  Government.  It 
is  the  duty  of  every  Corporation  or  its  paying  agent  to  with- 
hold 1  per  cent  of  the  amount  of  the  interest  paid  by  it  on  bonds, 
trust  deeds,  receiver's  certificates,  equipment  certificates  or  sim- 
ilar obligations  of  corporations,  umess  the  person  or  corpora- 
tion presenting  the  coupon  or  note  for  payment  files  with  the 
corporatios  or  its  paying  agent  the  form  of  certificate  prescribed 
by  the  Treasury  Department. 

An  individual  owner  presenting  a  coupon  to  a  corporation  or 
bank  either  for  payment  or  collection  should  file  with  it  prop- 
erly executed  certificate  Form  1000  (page  65)  claiming  or  dis- 
claiming exemption  therein. 

A  non-resident  alien  or  his  authorized  agent  when  presenting 
coupons  should  attach  certificate  Form  1004  (page  66). 

A  corporation  when  presenting  coupons  should  execute  and 
attach  certificate  Form  1001  (page  65). 

A  partnership  should  execute  and  attach  certificate  Form  1011 
(page  67).  A  member  of  partnership  certificate  Form  1003  (page 
65). 

Executors,  Trustees,  Conservators,  Guardians  and  others  act- 
ing in  a  fiduciary  capacity  for  the  purpose  of  claiming  exemption 
should  execute  certificate  Form  1015.  .For  the  purpose  of  dis- 
claiming exemption  from  deduction  of  the  tax  at  the  source,  the 
fiduciary  should  execute  certificate  Form  1019. 

Upon  receipt  of  a  certificate  duly  executed  the  corporation  is 
relieved  of  the  duty  of  withholding  the  tax. 

Where  a  bank  takes  a  coupon  for  collection  it  should  see  that 
a  certificate  of  proper  form  is  attached.  In  case  a  bank  received 
coupons  for  collection  unaccompanied  by  the  required  certificate, 
the  bank  should  execute  and  attach  certificate  Form  1002  (page 
66). 

The  foregoing  certificates  may  be  signed  by  the  owner  or  a 
duly  authorized  agent. 


SUBSTITUTION  CERTIFICATES. 

The  Treasury  Department  has  prescribed  a  form  of  substi- 
tution certificates  bearing  the  same  form  number  as  the  orig- 

33 


inal  ownership  certificates  with  the  letter  "a"  appended,  which 
are  to  be  executed  and  attached  to  coupons  by  a  bank  when  the 
coupons  are  transmitted  to  the  debtor  corporation  or  its  paying 
agent.  All  substitution  certificates  should  contain  the  same  num- 
ber as  the  original  ownership  certificate.  The  original  certificate 
should  be  endorsed  with  the  name  of  the  bank  or  collecting 
agent  and  the  date  of  the  substitution  certificate  together  with 
the  following: 

"The  duplicate  of  the  within  certificate  bearing  the  same  num- 
ber was  attached  to  the  coupons  within  mentioned  and  deliv- 
ered to  the  debtor  or  its  agent  by  whom  said  coupons  are  pay- 
able." 

The  original  certificates  of  ownership  must  be  forwarded  to 
the  Commissioner  of  Internal  Revenue  at  Washington  not  later 
than  the  20th  of  each  month  succeeding  the  date  on  which  said 
coupons  are  received  for  collection.  The  bank  making  the  sub- 
stitution certificates  must  keep  a  record  by  months,  showing  the 
serial  number,  the  date  and  name  of  the  owner  or  his  agent, 
showing  from  whom  the  coupons  were  received  with  the  ad- 
dress of  such  persons  or  corporation,  and  the  name  of  the  cor- 
poration whose  obligation  it  is  together  with  the  name  and  se- 
rial number  of  the  bond  issue,  the  principal  amount  of  the  cou- 
pons, and  amount  of  interest  collected.  Any  bank,  banker  in 
the  United  States,  or  its  collecting  agent  in  a  foreign  country, 
may  execute  substitution  certificates.  The  corporation  or  paying 
agent  shall  deliver  all  certificates  to  the  Collector  of  Internal 
Revenue.  A  corporation  or  its  paying  agent  must  file  a  list  of 
the  individuals  or  firm  from  whom  the  tax  has  been  withheld, 
but  no  list  is  required  of  certificates  where  exemption  has  been 
claimed  and  the  amount  of  the  interest  or  coupon  paid,  but  a 
debtor  corporation  must  include  in  its  list  certificates  in  which 
the  exemption  or  deductions  claimed  is  less  than  the  amount 
of  the  interest  paid  by  corporations.  The  corporation  or  its  pay- 
ing agent  must  make  separate  lists  for  each  bond  issued.  All 
certificates  must  be  sent  by  registered  mail  to  the  Commissioner 
of  Internal  Revenue,  accompanied  with  a  list  (Form  1012)  which 
the  corporation  is  required  to  file. 


FOREIGN  ITEMS. 

The  Regulations  require  that  the  tax  on  foreign  items  must 
be  withheld  by  the  first  bank  or  trust  company  in  the  United 
States  to  which  such  foreign  items  are  given  for  collection  or 
payment.  Every  person,  bank  or  trust  company  accepting  cou- 
pons, checks,  and  bills  of  exchange  for  collection  must  obtain 
license  for  that  purpose  from  the  Commissioner  of  Internal  Rev- 
enue. There  is  no  fee  for  this  license  but  a  bond  may  be  re- 
quired. 


34 


SYLLABUS 

OF 

INCOME  TAX  LAW 


1.     AMOUNT. 


Marginal    Refer- 
ence to  Statute. 
Pages  43-63. 


NORMAL  TAX— 1  Per  Cent. 
Net  income  of  individuals  exceeding  $3,000. 

($2,500  for  10  months  March  1  to  December  31  of 
the  year  1913.) 

Net  income  of  all  taxable  corporations,  domestic  or 
foreign,  accruing  during  the  calendar  year  January 
1  to  December  31,  1913. 

(Unless  a  "fiscal"  year  has  been  designated.) 

NOTE. — Paragraph    "S"    of    the    Income    Tax    Law    modifies    and    repeals    the 
Corporation    Excise    Law    of    1909. 


2.     AGAINST  WHAT  LEVIED. 

ENTIRE  TAXABLE  NET  INCOME  OF 

Citizens  of  the  United  States  residing  at  home  or 

abroad. 

Aliens  residing  in  the  United  States. 
Domestic  corporations. 

NET  INCOME  DERIVED  FROM  BUSINESS  TRANS- 
ACTED OR  CAPITAL  INVESTED  IN  THE 
UNITED  STATES  BY 


Aliens  residing  outside  of  the  United  States.  A-5 

Foreign  corporations.  G-2 

Exceptions :  A  non-resident  alien  need  pay  no  tax  on  Treasury 

income  from  bonds,  mortgages  and  similar  obliga-  Decision 
tions  of  corporations.  1887 


A-4 

D-3 

Treasury 
Decision 

1934 

G-l 

Treasury 
Decision 

1897 

S-l-2-3  ' 
Treasury 
Decision 

1937 


A-2 

A-3 
G-l 


ADDITIONAL  TAX 

(Gross    Incomes    of    Individuals    Only.) 
1%  on  the  amount  by  which  income  exceeds  $20,000. 

2%  on  the  amount  by  which  income  exceeds  $50,000, 
but  does  not  exceed  $75,000. 


35 


A-9  3%  on  the    amount  by  which  income  exceeds  $75,000, 

but  does  not  exceed  $100,000. 

A-10  4%  on  the  amount  by  which  income  exceeds  $100,000, 

but  do:s  not  exceed  $250,000. 

A-ll  5%  on  the  amount  by  which  income  exceeds  $250,000, 

but  does  not  exceed  $500,000. 

A-12  6%  on  the  amount  by  which  income  exceeds  $500,000. 

DEDUCTIONS  FOR  THE  NORMAL  TAX. 

B-8  1  •    Necessary  expenses  actually  paid  in  carrying  on  business : 


Exception : 


family 
living  or 


expenses  are  not  deductible. 


personal 

B-9  2.    All  interest  paid  on  indebtedness. 

B-10          3.    Taxes :     State,  County,  School  and  Municipal. 

_  XOTE. — National,     State,     County,     School     and     Municipal        Special     assess- 

13-10  ments    for    local    benefits    such    as    street    paving,    sewer    drainage,    etc.,    are 

not    deductible. 

B-ll          4.    Losses  actually  sustained  during  the  year. 

(a)  Incurred  in  trad?  or  business. 

(b)  From  fire,  storm  or  shipwreck,  and  not  compensated 

by  insurance  or  otherwise. 

B-12          5.    Debts  due  and  found  worthless  and  charged  off. 
B-13          h.    Reasonable  allowance  for  wear  and  tear  of  property. 

B-14  NOTE. — No    deductions    for    new    buildings,    permanent    improvements,    etc., 

which    tend   to   increase   the   value   of   property. 

XOTE. — The   foregoing    deductions    1,    2,    3,    4,    5    and    6    only   are    allowed    in 
calculating  net  income   for   the   additional   tax. 

B-15  7.  Dividends  received  from  a  corporation,  joint-stock  com- 
pany or  association  which  are  taxable  on  their  net 
income  at  the  source. 

B-16  8.  Amount  of  income  on  which  tax  is  paid  or  withheld  at 
source : 

Treasury  (a)   Interest  on  obligations  of  the  United  States,  a  State, 

Decision  County,  or  a  political  subdivision  of  a  State,  in- 

cluding interest  paid  on  public  improvements, 
reclamation,  drainage  or  special  assessment  bonds 
issued  for  local  improvements. 

(b)   Salaries  of 

1.  Present  President  of  the  United  States. 

2.  Judges  of  the  Federal  Courts. 

3.  Officers  and  employees  of  a  State  or  a  political 

subdivision  of  a  State,  except  when  such  salary 
is  pard  by  the  United  States  'Government. 

36 


9.    Exemptions  from  the  tax  : 

(a)  $3,000  per  annum  for  a  single  person. 
($2,500  for  the  year  1913.) 

(b)  $4,000  per  annum  for  a  married  couple  living  to- 

g  ther. 

($3,333.33  for  the  year  1913  for  a  married  couple 
living  together.) 

NOTE. — Exemptions   7,  8  and  9  are  not«  allowed  in  calculating  the  net  income 
for   the   additional   tax. 


C-l 

Treasury 
Decision 

C-2 

Treasury 
Decision 


Form  1040 


THE  RETURN 


ANNUAL  RETURN  MUST  BE  FILED  BY 

1.  Persons  having  an  annual  net  income  exceeding  $3,000. 

2.  Trustees,    executors,    administrators    and    conservators 

having  the  receipt,  custody  or  payment  of  annual  net 
income  of  another  person  exceeding  $3,000. 

NOTE. — Excluding  from  the  computation  of  such  net  income  dividends  re- 
ceived from  corporations  and  amounts  on  which  the  normal  tax  has  been 
withhe'd  at  the  source. 

($2,500  for  ten  months  of  the  year   1913,  March  1  to 
Dec;mb:r  31.) 

3.  Corporations  total  annual  net  income. 
(No  specific  exemption  allowed.) 

4.  Persons  or  corporations  withholding  the  tax  at  the  source. 

(a)  A  separate  return  for  each  payee. 

(b)  Certificate  Form  No.  1042,  page  94. 

(c)  A  return  by  one  of  two  or  more  joint  trustees  is 

sufficient. 


D-8 

E-8 

Treasury 
Decision 

1945 

Treasury 
Decision 

1934 

G-7 
D-6 


D-5 


RETURN  MUST  CONTAIN : 

1.  The  gross  amount  of  income  from  all  separate  sources, 
and  from  the  total,  deducting  the  aggregate  deductions 
of  authorized  expenses  and  allowances.  Return  to  be 
under  oath  or  affirmation. 

(a)  Personal  return  Forms  Nos.  1040,  1041,  pages  71-76. 

(b)  Corporations'  returns,  Forms  Nos.  1030,  1031,  1032, 

1033,  1034,  1035,  pages  80-90. 

WHEN  RETURN  MUST  BE  FILED 

1.  Individuals: 

(a)   On  or  before  March  1. 

2.  Corporations : 

(a)  On  or  before  March  1,  or 

(b)  Within  60  days  after  the  close  of  the  designated 

fiscal  vear. 


B-l 
G-l 


D-3 
G-35 


•37 


WHERE  RETURN  MUST  BE  FILED : 

G-35          1.    Individuals: 

(a)   Where  the  person  or  corporation  resides  or  has  his 
or  its  principal  place  of  business. 

G-35          2.    Foreign  corporations  and  non-residents: 

(a)  Where  the  principal  place  of  business  in  the  United 
States  is  located. 

D-5          3.    Trustees,  etc. : 

(a)  Where  such  trustees  reside,  or 

(b)  Where  will  or  instrument  under  which  he  acts  is 

recorded. 

WHEN  THE  TAX  MUST  BE  PAID: 

E-l  1 .    Individual : 

(a)   Between  June  1  and  June  30. 

G-60         2.    Corporation : 

(a)   Between  June  1  and  June  30,  or 

G-61.  (b)   Where  corporation  uses  "fiscal  year,"  tax  must  be 

paid    within    180   days   after   the   close   of   such 
"fiscal  year." 


DEDUCTION  AND  PAYMENT  OF  TAX  AT  THE 
SOURCE. 

DEDUCTION  AT  THE  SOURCE  REQUIRES: 

E-8  1.    Persons  to  withhold  the  normal  tax  of  one  per  cent  on  all 

funds  payable  to  another  person  when  the  aggregate 
amount  exceeds  $3,000,  and  is  fixed  and  certain. 

E-22  2.  Corporations  to  withhold  the  normal  tax  of  one  per  cent 
on  all  interest  paid  by  them  or  their  agent  on  bonds, 
mortgages,  trust  deeds  or  similar  obligations  of  cor- 
porations regardless  of  amount. 

E-12  3.  The  person  required  to  deduct  the  tax  is  personally  liable 
for  the  same. 

A-14  4.  The  additional  tax  is  not  deducted  at  the  source  at  any 
time. 

D-10  5.  No  tax  is  deducted  on  dividends  of  corporations  which 
pay  the  income  tax  on  their  net  earnings. 

WHEN  THE  TAX  IS  TO  BE  DEDUCTED  AT  THE 
SOURCE: 

E-19         1.    Whenever  the  aggregate  amount  paid  is  fixed  and  certain. 

NOTE. — Not  including  dividends   on   stock  of  corporations. 

Treasury     2.    The  tax  of  one  per  cent  is  deducted  "at  the  place  where 
Decision  the  income  originates." 

38 


(a)  Interest  on  bonds,  mortgages  or  deeds  of  trust  of 

corporations,  domestic  or  foreign. 

(b)  Interest  on  foreign  bonds. 

(c)  Dividends  of  corporations  or  insurance  companies 

doing  business  in  foreign  countries. 

HOW  EXEMPTIONS  MAY  BE  CLAIMED  AGAINST 
DEDUCTION  OF  THE.TAX  AT  THE  SOURCE: 

1.  The  $3,000  personal  exemption. 

To  obtain  exemption,  the  payee  must  file  with  the 
person  withholding  the  tax  Certificate  Form  No.  1007, 
page  67,  at  any  time  30  days  before  the  annual  return 
of  the  withholding  agent  is  required  to  be  made. 

2.  Deductions  for  expense : 

(a)  The  payee  must  file  with  the  withholding  agent  a 
true  return  of  his  income  from  all  sources  and  the 
deduction  claimed  therein  Certificate  Form  No. 
1008,  page  70. 

3.  If  the  payee  is  a  minor,  or  insane,  or  absent  from  the 

United  States,  or  unable  by  illness  to  make  such  return, 
the  father,  conservator  or  other  authorized  person  may 
make  the  return  for  such  person  under  oath.  An  ex- 
tension of  30  days  for  filing  the  return  may  be 
obtained  upon  application  to  the  collector,  made  within 
the  period  forsuchextention  is  desired. 

NOTE. — Deduction    and    payment    of    the    tax    at    the    source    applies    only    to 
amounts   payable   to   individuals,    not   to    corporations. 

GROSS  INCOME. 

GROSS   INCOME   INCLUDES: 


Salaries 
Wages 

Gains  and  profits 
Compensation  for 
personal  service 


Professions 

Vocations 

Businesses 

derived 

Trade 
Commerce 

or     \ 

Sales  or 

accrued 
from 

Dealings  i 
or 

Property, 
Real 

Growing  out  of 

and 

Ownership 

Personal. 

or  use  of 

2.    Income  received 
from  or 
accruing  from 


—  also  — 

Interest 

Rent 

Dividends 

Securities 

Transactions  of  any  lawful  business 

carried  on  for  gain  or  profit 
Gains,    profits   or    income   accruing 

from-  any  source  whatever. 
39 


E-18 


E-30 


B-l 
B-2 

B-3 


B-4 


Net  income  for  the  purpose  of  the  income  tax  is  the 
amount  of  the  gross  income  less  the  deductions  1,  2,  3,  4, 
5  and  6. 

NOTE. — See    deductions    for    the    normal    tax. 

GROSS  INCOME  EXCLUDES: 


B-5  1.    Money  or  value 

of  property 
acquired  by 


Gift 
Bequest 
Devise 
Descent 


But  the  income  from  thest 
is  taxable. 


2.    Proceeds  of  Life  Insurance  Policies : 

(a)  Paid  on  death  of  the  insured ; 

(b)  Credited  to  the  insured  on  surrender  of  contract,  as 

1.  Endowments. 

2.  Annuity  contracts. 


CORPORATIONS'  INCOME  TAX. 

AMOUNT  OF  TAX: 
The  normal  tax  of  one  per  cent  only. 

ON  WHAT  THE  TAX  IS  ASSESSED: 

G-l  1.    Domestic  corporations  : 

(a)   Entire  net  income. 

C-2  2.    Foreign  corporations  : 

(a)   Net  income  accruing  from  business  transacted  and 
capital  invested  in  the  United  States. 

WHAT  IS  NET  INCOME: 
Gross  Income  less 

G-8  1.  Expenses  of  maintenance  and  operation,  including  rentals. 

G-9  2.    All  losses  not  compensated  by  insurance  or  otherwise. 

G-9          3.    Reasonable  wear  and  tear. 
G-15          4.    Amount  of  interest  paid  on  its  indebtedness. 
G-l 9          5.    Sums  paid  for  taxes. 

WHAT  RETURN^MUST  CONTAIN: 
(See  Forms  1030  to  1035,  inclusive,  pages  80-90.) 

1.  Total  amount  of  capital  stock  outstanding. 

2.  Total  amount  of  bonded  or  other  indebtedness. 

3.  Gross  income. 

40 


4.  Deductions  as  above  specified. 

5.  Net  income  after  making  these  deductions. 

BY  WHOM  REPORT  MUST  BE  SIGNED: 
(See  Instructions.) 

1.  By  presid  nt,  vice-president  or  other  principal  officer,  and 

2.  By  treasurer  or  assistant  treasurer. 

3.  Return  to  be  under  oath  or  affirmation. 

PENALTIES. 

FOR  NEGLECT  OR  REFUSAL  TO  MAKE 
RETURN  ON  TIME: 

1.  Individual:  F-l 

(a)  Fine— not  less  than  $20.00  or  over  $1,000.00.  E-4 

(b)  There  shall  be  added  to  the  tax  5%  of  the  amount 

thereof,  and  1%  per  month  from  tim.2  it  became 
due. 

2.  Corporations : 

(a)  Fine— not  exceeding  $10,000.00  G-66 

(b)  Th-re  shall  b°  added  to  the  tax  5%  of  the  amount  E-4 

thereof,  and  1%  per  month  from  time  it  became 
due. 

FOR  MAKING  A  FALSE  OR  FRAUDULENT 
RETURN : 

1.  Individual  or  officer  of  a  corporation:  p_2 
(a)   Fine — not   exceeding   $2,000.00,   imprisonment    for     -^  g  3176 

one  year,  or  both. 

2.  Corporation : 

(a)   Fine— not  exceeding  $10,000.00.  G-66 

FOR  FILING  "AT  SOURCE"  A  FALSE  STATEMENT          E-14 
RESPECTING  THE  $3,000  ALLOWANCE  (OR          R.  S.  3176 

$4,000  FOR  MARRIED   COUPLE): 
(a)   Fine  of  $300.00. 

ALL  PERSONS  UNDERTAKING  AS  A  MATTER  OF  E-28 
BUSINESS,  THE  COLLECTION  OF  FOREIGN 
PAYMENTS  OF  INTEREST  OR  DIVIDENDS 
MUST  TAKE  OUT  A  LICENSE  UNDER  PENALTY 
OF  FINE  NOT  EXCEEDING  $5,000.00,  OR  ONE 
YEAR'S  IMPRISONMENT,  OR  BOTH. 

THE  DISTRICT  COURTS  OF  THE  UNITED  STATES  K  - 

ARE  GIVEN  JURISDICTION  (IN  CASES  WHERE 

41 


PERSONS  ARE  SUMMONED  BY  A  COLLECTOR 
TO  APPEAR  AND  TESTIFY  REGARDING  THEIR 
RETURNS)  TO  COMPEL  SUCH  ATTENDANCE, 
PRODUCTION-  OF  ROOKS  AND  TESTIMONY. 


U.  S.  INCOME  TAX  STATUTE 

BEING  SECTION  IT  OF  THE  ACT  OF  OCTOBER  3,  1913, 
ENTITLED  "AN  ACT  TO  REDUCE  TARIFF  DUTIES  AND 
TO  PROVIDE  REVENUE  FOR  THE  GOVERNMENT  AND 
FOR  OTHER  PURPOSES/' 

A.     Subdivision  1.     That  there  shall  be  levied,  assessed,  collected  Paragraph  A 
and  paid  annually  upon  the  entire  net  income  arising  or  accruing  A-l 
from  all  sources  in  the  preceding  calendar  year 

to  every  citizen  of  the  United  States,  whether  residing  at  home  A-2 
or  abroad, 

and  to  every  person  residing  in  the  United  States,  though  not  a  A-3 
citizen  thereof, 

a  tax  of   1   per  centum  per  annum  upon   such  income,  except  as  A-4 
hereinafter  provided; 

and  a  like  tax  shall  be  assessed,  levied,  collected,  and  paid  annually  A-5 
upon  the  entire  net  income  from  all  property  owned  and  of  every 
business,  trade,  or  profession  carried  on  in  the  United   States  by 
persons  residing  elsewhere. 

Subdivision  2.     In  addition  to  the  income  tax  provided  under  this  A-6 
section   (herein  referred  to  as  the  normal  income  tax)   there  shall 
be  levied,   assessed,   and   collected   upon   the  net   income  of   every 
individual   an   additional    income    tax    (herein    referred   to   as   the 
additional  tax)  of 

1  per  centum  per  annum  upon  the  amount  by  which  the  total  A-7 
net  income  exceeds  $20,000  and  does  not  exceed  $50,000,  and 

2  per  centum  per  annum  upon  the  amount  by  which  the  total  A-8 
net  income  exceeds  $50,000  and  does  not  exceed  $75,000, 

3  per  centum  per  annum  upon  the  amount  by  which  the  total  A-9 
net    income   exceeds  $75,000  and   does   not   exceed   $100,000, 

4  per  centum  per  annum  upon  the  amount  by  which  the  total  A-10 
net  income  exceeds  $100,000  and  does  not  exceed  $250,000, 

5  per  centum  per  annum  upon  the  amount  by  which  the  total  A-l  1 
net  income  exceeds  $250,000  and  does  not  exceed  $500,000,  and 

6  per  centum  per  annum  upon  the  amount  by  which  the  total  A-l 2 
net  income  exceeds  $500,000. 

All  the  provisions  of  this  section  relating  to  individuals  who  are  A-l  3 
to  be  chargeable  with  the  normal  income  tax,  so  far  as  they  are 
applicable  and  are  not  inconsistent  with  this  subdivision  of  para- 
graph A,  shall  apply  to  the  levy,  assessment,  and  collection  of  the 
additional  tax  imposed  under  this  section. 

Every  person  subject  to  this  additional  tax  shall,  for  the  purpose  A-l 4 
of  its  assessment  and  collection,  make  a  personal   return  of  his 

43 


total  net  income  from  all  sources,  corporate  or  otherwise,  for  the 
preceding  calendar  year,  under  rules  and  regulations  to  be  pre- 
scribed by  the  Commissioner  of  Internal  Revenue  and  approved  by 
the  Secretary  of  the  Treasury. 

A-15  For  the  purpose  of  this  additional  tax  the  taxable  income  of  any 
individual  shall  embrace  the  share  to  which  he  would  be  entitled 
of  the  gains  and  profits,  if  divided  or  distributed,  whether  divided 
or  distributed  or  not,  of  all  corporations,  joint-stock  companies, 
or  associations  however  created  or  organized,  formed  or  fraudu- 
lently availed  of  for  the  purpose  of  preventing  the  imposition  of 
such  tax  through  the  medium  of  permitting  such  gains  and  profits 
to  accumulate  instead  of  being  divided  or  distributed ; 

A-16  and  the  fact  that  any  such  corporation,  joint-stock  company,  or 
association,  is  a  mere  holding  company,  or  that  the  gains  and 
profits  are  permitted  to  accumulate  beyond  the  reasonable  needs 
of  the  business  shall  be  prima  facie  evidence  of  a  fraudulent  pur- 
pose to  escape  such  tax ; 

A-17  but  the  fact  that  the  gains  and  profits  are  in  any  case  permitted 
to  accumulate  and  become  surplus  shall  not  be  construed  as  evi- 
dence of  a  purpose  to  escape  the  said  tax  in  such  case  unless  the 
Secretary  of  the  Treasury  shall  certify  that  in  his  opinion  such 
accumulation  is  unreasonable  for  the  purposes  of  the  business. 

A-18  When  requested  by  the  Commissioner  of  Internal  Revenue,  or 
any  district  collector  of  internal  revenue,  such  corporation,  joint- 
stock  company,  or  association  shall  forward  to  him  a  correct' state- 
ment of  such  profits  and  the  names  of  the  individuals  who  would 
be  entitled  to  the  same  if  distributed. 

Paragraph  B       B.    That,  subject  only  to  such  exemptions  and  deductions  as  are 
B-l   hereinafter  allowed,  the  net  income  of  a  taxable  person  shall  include 
gains,  profits,  and  income  derived  from 

B-2  salaries,  wages,  or  compensation  for  personal  service  of  what- 

ever kind  and  in  whatever  form  paid, 

B-3  or    from    professions,    vocations,    business,    trade,    commerce, 

or  sales,  or  dealings  in  property,  whether  real  or  personal, 
growing  out  of  the  ownership  or  use  of  or  interest  in  real  or 
personal  property, 

B-4  also  from  interest,  rent,  dividends,  securities,  or  the  transaction 

of  any  lawful  business  carried  on  for  gain  or  profit. 

B-5  °r  gains  or  profits  and  income  derived  from  any  source  what- 

ever, including  the  income  from  but  not  the  value  of  property 
acquired  by  gift,  bequest,  devise,  or  descent: 

Provided,  That  the  proceeds  of  life  insurance  polices  paid  upon  the 
death  of  the  person  insured  or  payments  made  by  or  credited. to  the 
insured,  on  life  insurance,  endowment,  or  annuity  contracts,  upon  the 
return  thereof  tP  the  insured  at  the  maturity  of  the, term  mentioned  in 
the  conttatt,  or  upon  surrender  of  contract,  shall  not  tfe- inducted  as 

44 


That  in  computing  net  income  for  the  purpose  of  the  normal  tax  B-7 
there  shall  be  allowed  as  deductions: 

First,  the  necessary  expenses  actually  paid  in  carrying  on  any  g.g 
business,   not  including  personal,  living,  or   family  expenses ; 

second,  all  interest  paid  within  the  year  by  a  taxable  person  3.9 
on  indebtedness; 

third,  all  national,   State,  county,  school,  and  municipal  taxes  B-10 
paid  within  the  year,  not  including  those  assessed  against  local 
benefits ; 

fourth,  losses  actually  sustained  during  the  year,  incurred  in  B-l  1 
trade  or   arising   from    fires,   storms,   or   shipwreck,    and   not 
compensated   for  by  insurance  or  otherwise ; 

fifth,    debts   due   to    the   taxpayer   actually   ascertained   to   be  B-l 2 
worthless  and  charged  off  within  the  year; 

sixth,  a  reasonable  allowance  for  the  exhaustion,  wear  and  B-l 3 
tear  of  property  arising  out  of  its  use  or  employment  in  the 
business,  not  to  exceed,  in  the  case  of  mines,  5  per  centum  of 
the  gross  value  at  the  mine  of  the  output  for  the  year  for  which 
the  computation  is  made,  but  no  deduction  shall  be  made  for 
any  amount  of  expense  of  restoring  property  or  making  good 
the  exhaustion  thereof  for  which  an  allowance  is  or  has  been 
made: 

Provided,  That  no  deduction  shall  be  allowed  for  any  amount  paid  out  B-l 4 
for  new  buildings,   permanent  improvement,   or  betterments,   made   to 
increase  the  value  of  any  property  or  estate ; 

seventh,  the  amount  received  as  dividends  upon  the  stock  or  B-l 5 
from  the  net  earnings  of  any  corporation,  joint-stock  company, 
association,  or  insurance  company,  which  is  taxable  upon  its 
net  income  as  hereinafter  provided ; 

eighth,  the  amount  of  income,  the  tax  upon  which  has  been  B-l 6 
paid   or  withheld   for  payment  at  the  source   of   the  income, 
under  the  provisions  of  this  section. 

Provided,  That  whenever  the  tax  upon  the  income  of  a  person  is  B-l  7 
required  to  be  withheld  and  paid  at  the  source  as  hereinafter  required, 
if  such  annual  income  does  not  exceed  the  sum  of  $3,000  or  is  not 
fixed  or  certain,  or  is  indefinite,  or  irregular  as  to  amount  or  time 
of  accrual  the  same  shall  not  be  deducted  in  the  personal  return  of 
such  person. 

The  net  income  from  property  owned  and  business  carried  on  in  B-l 8 
the  United  States  by  persons  residing  elsewhere  shall  be  computed 
upon  the  basis  prescribed  in  this  paragraph  and  that  part  of  para- 
graph G  of  this  section  relating  to  the  computation  of  the  net 
income  of  corporations,  joint-stock  and  insurance  companies, 
organized,  created  or  existing  under  the  laws  of  foreign  countries, 
in  so  far  as  applicable. 

45 


B-19       That  in  computing  n«t  income  mnder  this  section  there  shall  be 
excluded 

B-20  the  interest  upon  the  obligations  of   a  State  or  any  political 

subdivision  thereof,  and   upon   the  obligations  of   the   United 
States  or  its  possessions; 

B-21  also  the  compensation  of  the  present  President  of  the  United 

States  during  the  term  for  which  -he  has  been  elected, 

B-22  and  of  the  judges  of  the  supreme  and  inferior  courts  of  the 

United  States  now  in  office, 

B-23  and  the  compensation  of  all  officers  and  employees  of  a  State 

or  any  political  subdivision  thereof  except  when  such  compen- 

Paragraph  C       C.     That  there  shall  be  deducted  from  the  amount  of  the  net 
C-l    income  of  each  of  said  persons,  ascertained  as  provided  herein,  the 
sum  of  $3,000, 

C-2  plus  $1,000  additional  if  the  person  making  the  return  be  a 

married  man  with  a  wife  living  with  him, 

C-3  or  plus  the  sum  of  $1,000  additional  if  the  person  making  the 

return  be  a  married  woman  with  a  husband  living  with  her ; 

C-4  but  in  no  event  shall  this  additional  exemption  of  $1,000  be 

deducted  by  both  a  husband  and  a  wife: 

C-5  Provided,  That  only  one  deduction  of  $4,000  shall  be  made  from  the 

aggregate  income  of  both  husband  and  wife  when  living  together. 


Paragraph  D       D.    The  said  tax  shall  be  computed  upon  the  remainder  of  said 
£)_!    net  income  of  each  person  subject  thereto,  accruing  during  each 
„     preceding  calendar  year  ending  December  thirty-first: 

D-2  Provided,  However,  That  for  the  year  ending  December  thirty-first, 

nineteen  hundred  and  thirteen,  said  tax  shall  be  computed  on  the  net 
income  accruing  from  March  first  to  December  thirty-first,  nineteen 
hundred  and  thirteen,  both  dates  inclusive,  after  deducting  five-sixths 
only  of  the  specific  exemptions  and  deductions  herein  provided  for. 

D-3  On  or  before  the  first  day  of  March,  nineteen  hundred  and  four- 
teen, and  the  first  day  of  March  in  each  year  thereafter,  a  true  and 
accurate  return,  under  oath  or  affirmation,  shall  be  made  by  each 
person  of  lawful  age,  except  as  hereinafter  provided,  subject  to  the 
tax  imposed  by  this  section,  and  having  a  net  income  of  $3,000  or 
over  for  the  taxable  year,  to  the  collector  of  internal  revenue  for 
the  district  in  which  such  person  resides  or  has  his  principal  place 
of  business,  or,  in  the  case  of  a  person  residing  in  a  foreign  country, 
in  the  place  where  his  principal  business  is  carried  on  within  the 
United  States,  in  'such  form  as  the  Commissioner  of  Internal 
Revenue,  with  the  approval  of  the  Secretary  of  the  Treasury,  shall 
prescribe,  setting  forth  specifically  the.  gross  amount  of  income  from 
all  separate  sources  and  from  the  total  thereof,  deducting  the  aggre- 
gate items  or  expenses  and  allowance  herein  authorized  ; 
(  46 


guardians,  trustees,  executors,  administrators,  agents,  receivers,  D-4 
conservators,  and  all  persons,  corporations,  or  associations 
acting  in  any  fiduciary  capacity,  shall  make  and  fender  a  return 
of  the  net  income  of  the  person  for  whom  they  act,  subject  to 
this  tax,  coming  into  their  custody  or  control  and  management, 
and  be  subject  to  all  the  provisions  of  this  section  which  apply 
to  individuals : 

Provided,  That  a  return  made  by  one  of  two  or  more  joint  guardians, 
trustees,  executors,  administrators,  agents,  receivers,  and  conservators, 
or  other  persons  acting  in  a  fiduciary  capacity,  filed  in  the  district 
where  such  person  resides,  or  in.  the  district  where  the  will  or  other 
instrument  under  which  he  acts  is  recorded,  under  such  regulations  as 
the  Secretary  of  the  Treasury  may  prescribe,  shall  be  a  sufficient  com- 
pliance with  the  requirements  of  this  paragraph  ; 

and  also  all  persons,  firms,  companies,  copartnerships,  corpora-  D-6 
tions,  joint-stock  companies  or  associations,  and  insurance  com- 
panies, except  as  hereinafter  provided,  in  whatever  capacity 
acting,  having  the  control,  receipt,  disposal,  or  payment  of 
fixed  or  determinable  annual  or  periodical  gains,  profits,  and 
income  of  another  person  subject  to  tax,  shall  in  behalf  of  such 
person  deduct  and  withhold  from  the  payment  an  amount 
equivalent  to  the  normal  income  tax  upon  the  same  and  make 
and  render  a  return,  as  aforesaid,  but  separate  and  distinct,  of 
the  portion  of  the  income  of  each  person  from  which  the  nor- 
mal tax  has  been  thus  withheld,  and  containing  also  the  name 
and  address  of  such  person,  or  stating  that  the  name  and  address 
or  the  address,  as  the  case  may  be,  are  unknown: 

Provided,  That  the  provision  requiring  the  normal  tax  of  individuals   Q.7 
to  be  withheld  at  the  source  of  the  income,  shall  not  be  construed  to 
require  any  of  s^uch  tax  to  be  withheld  prior  to  the  first  day  of  Novem- 
ber, nineteen  hundred  and  thirteen  : 

Provided,  Further,  That  in  either  case  above  mentioned  no  return  of   £).g 
.     income  not  exceeding  $3,000  shall  be  required : 

Provided,  Further,  That  any  persons  carrying  on  business  in  partner-  £)_9 
ship  shall  be  liable  for  income  tax  only  in  their  individual  capacity, 
and  the  share  of  the  profits  of  a  partnership  to  which  any  taxable 
partner  would  be  entitled  if  the  same  were  divided  whether  .divided  or 
otherwise,  shall  be  returned  for  taxation  and  the  tax  paid,  under  the 
Provisions  of  this  section,  and  any  such  firm,  when  requested  by  the 
Commissioner  of  Internal  Revenue,  or  any  district  collector,  shall  for- 
ward to  him  a  correct  statement  of  such  profits  and  the  names  of  the 
individuals  who  would  be  entitled  to  the  same,  if  distributed: 

Provided,  Further,  That  persons  liable  for  the  normal  income  tax  I). in 
only,  on  their  own  account  or  in  behalf  of  another,  shall  not  be  required 
to  make  return  of  the  income  derived  from  dividends  on  the  capital 
stock  or  from  the  net  earnings  of  corporations,  joint-stock  companies 
or  associations,  'and  insurance  companies  taxable  upon  their  net  income 
as  hereinafter  provided. 

Any  person  for  whom  return  has  been  made  and  the  tax  paid,  D-ll 
or  to  be  paid  as  aforesaid,  shall  not  be  required  to  make  a  return 
unless  such  person  has  other  net  income,  but  only  one  deduction 
of  $3,000  shall  be  made  in  the  case  of  any  such  person. 


D-12  The  collector  or  deputy  collector  shall  require  every  list  to  be 
verified  by  the  oath  or  affirmation  of  the  party  rendering  it.  If  the 
collector  or  deputy  collector  have  reason  to  believe  that  the  amount 
of  any  income  returned  is  understated,  he  shall  give  due  notice  to 
the  person  making  the  return  to  show  cause  why  the  amount  of  the 
return  should  not  be  increased,  and  upon  proof  of  the  amount 
understated  may  increase  the  same  accordingly.  If  dissatisfied  with 
the  decision  of  the  collector,  such  person  may  submit  the  case,  with 
all  the  papers,  to  the  Commissioner  of  Internal  Revenue  for  his 
decision,  and  may  furnish  sworn  testimony  of  witnesses  to  prove 
any  relevant  facts. 

Paragraph  E       £•     That  all  assessments  shall  be  made  by  the  Commissioner  of 

g_j    Internal  Revenue  and  all  persons  shall  be  notified  of  the  amount  for 

which  they  are  respectively  liable  on  or  before  the  first  day  of  June 

of  each  successive  year,  and  said  assessments  shall  be  paid  on  or 

before  the  thirtieth  day  of  June, 

E-2  except  in  cases  of  refusal  or  neglect  to  make  such  return  and 

in  cases  of  false  or  fraudulent  returns,  in  which  cases  the 
Commissioner  of  Internal  Revenue  shall,  upon  the  discovery 
thereof,  at  any  time  within  three  years  after  said  return  is  due, 
make  a  return  upon  information  obtained  as  provided  for  in 

E-3  this  section  or  by  existing  law,  and  the  assessment  made  by 

the  Commissioner  of  Internal  Revenue  thereon  shall  be  paid 
by  such  person  or  persons  immediately  upon  notification  of  the 
amount  of  such  assessment; 

E-4  and  to  any  sum  or  sums  due  and  unpaid  after  the  thirtieth  day  of 
June  in  any  year,  and  for  ten  days  after  notice  and  demand  thereof 
by  the  collector,  there  shall  be  added  the  sum  of  5  per  centum  on 
the  amount  of  tax  unpaid,  and  interest  at  the  rate  of  1  per  centum 
per  month  upon  said  tax  from  the  time  the  same  became  due, 

E-5  except  from  the  estates  of  insane,  deceased,  or  insolvent  persons. 

E-6  All  persons,  firms  copartnerships,  companies,  corporations,  joint- 
stock  companies  or  associations,  and  insurance  companies,  in  what- 
ever capacity  acting,  including : 

E-7  lessees  or  mortgagors  of   real   or  personal   property,   trustees 

acting  in  any  trust  capacity,  executors,  administrators,  agents, 
receivers,  conservators,  employers,  and  all  officers  and  employees 
of  the  United  States 

E-8  having  the  control,  receipt,  custody,  disposal,  or  payment  of  interest, 
rent,  salaries,  wages,  premiums,  annuities,  compensations,  remunera- 
tion, emoluments,  or  other  fixed  or  determinable  armual  gains, 
profits,  and  income  of  another  person,  exceeding  $3,000  for  any 
taxable  year, 

E-9  other  than  dividends  on  capital  stock,  or  from  the  net  earnings 

of  corporations  and  joint-stock  companies  or  associations  sub- 
ject to  like  tax, 

48 


who  are  required  to  make  and  render  a  return'  in  behalf  of  another,  E-10 
as  provided  herein,  to  the  collector  of  his,  her,  or  its  district, 

are  hereby  authorized  and  required  to  deduct  and  withhold  from  £-11 
such  annual  gains,  profits,  and  income  such  sum  as  will  be  sufficient 
to  pay  the  normal  tax  imposed  thereon  by  this  section,  and  shall 
pay  to  the  officer  of  the  United  States  Government  authorized  to 
receive  the  same ; 

and  they  are  each  hereby  made  personally  liable  for  such  tax.  E-12 

In  all  cases  where  the  income  tax  of  a  person  is  withheld  and  E-13 
deducted  and  paid  or  to  be  paid  at  the  source,  as  aforesaid,  such 
person  shall  not  receive  the  benefit  of  the  deduction  and  exemption 
allowed  in  paragrh  C  of  this  section  except  by  an  application 
for  refund  of  tHe  tax  unless  he  shall,  not  less  than  thirty 
days  prior  to  the  day  on  which  the  return  of  his  income  is  due,  file 
with  the  person  who  is  required  to  withhold  and  pay  tax  for  him,  a 
signed  notice  in  writing  claiming  the  benefit  of  such  exemption  and 
thereupon  no  tax  shall  be  withheld  upon  the  amount  of  such 
exemption : 

Provided,    That    if    any    person    for    the   purpose    of    obtaining   any   £-14 
allowance  or  reduction  by  virtue  of  a  claim  for  such  exemption,  either 
for  himself  or  for  any  other  person,  knowingly  makes  any  false  state- 
ment or  false  or  fraudulent  representation,  he  shall  be  liable  to  a  pen- 
alty of  $300; 

nor  shall  any  person  under  the  foregoing  conditions  be  allowed  the  E-15 
benefit  of  any  deduction  provided  for  in  subsection  B  (  Page  45  )  of 
this  section  unless  he  shall,  not  less  than  thirty  days  prior  to  the  day 
on  which  the  return  of  his  income  is  due, 

either  file  with  the  person  who  is  required  to  withhold  and  pay  tax  E-16 
for  him  a  true  and  correct  return  of  his  annual  gains,  profits,  and 
income  from  all  other  sources,  and  also  the  deductions  asked  for, 
and  the  showing  thus  made  shall  then  become  a  part  of  the  return 
to  be  made  in  his  behalf  by  the  person  required  to  withhold  and 
pay  the  tax, 

or  likewise  make  application  for  deductions  to  the  collector  of  the  E-17 
district  in  which  return  is  made  or  to  be  made  for  him : 

Provided,  Further,  That  if  such  person  is  a  minor  or  an  insane  per-  £-18 
son,  or  is  absent  from  the  United  States,  or  is  unable  owing  to  serious 
illness  to  make  the  return  and  application  above  provided  for,  the  re- 
turn and  application  may  be  made  for  him  or  her  by  the  person  required 
to  withhold  and  pay  the  tax,  he  making  oath  under  the  penalties  of 
this  Act  that  he  has  sufficient  knowledge  of  the  affairs  and  property  of 
his  beneficiary  to  enable  him  to  make  a  full  and  complete  return  for 
him  or  her,  and  that  the  return  and  application  made  by  him  are  full 
and  complete : 

Provided,  Further,  That  the  amount  of  the  normal  tax  hereinbefore  £-19 
imposed  shall  be  deducted  and  withheld  from  fixed  and  determinable 
annual  gains,  profits,  and  income  derived  from  interest  upon  bonds  and 
mortgages,  or  deeds  or  trust  or  other  similar  obligations  of  corpora- 
tions, joint-stock  companies  or  associations  and  insurance  companies, 
whether  payable  annually  or  at  shorter  or  longer  periods,  although  such 

49 


interest  does  not  amount  to  $3,000,  subject  to  the  provisions  of  this 
section  requiring  the  tax  to  be  withheld  at  the  source  and  deducted 
from  annual  income  and  paid  to  the  Government; 

E-20  and  likewise  -the  amount  of   such  tax   shall  be  deducted  and  withheld 

from  coupons,  checks,  or  bills  of  exchange  for  or  in  payment  of  interest 
upon  bonds  of  foreign  countries  and  upon  foreign  mortgages  or  like 
obligations  (not  payable  in  the  United  States), 

E-21  and  also  from  coupons,  checks,  or  bills  of  exchange  for  or  in  payment 

of  any  dividends  upon  the  st6ck  or  interest  upon  the  obligations  of  for- 
eign corporations,  associations,  and  insurance  companies  engaged  in 
business  in  foreign  countries ; 

E-22  and  the  tax  in  each  case  shall  be  withheld  and  deducted   for  and  in 

behalf  of  any  person  subject  to  the  tax  hereinbefore  imposed,  although 
such  interest,  dividends,  or  other  compensation  does  not  exceed  $3,000, 

E-23  by  any  banker  or  person  who  shall  sell  or  otherwise  realize  coupons, 

checks,  or  bills  of  exchange  drawn  or  made  in  payment  of  'any  such 
interest  or  dividends  (not  payable  in  the  United  States), 

E-24  and  any  person  who  shall  obtain  payment   (not  in  the  United  States), 

in  behalf  of  another  of  such  dividends  and  interest  by  means  of  coupons, 
checks,  or  bills  of  exchange, 

E-25  and  also  any  dealer  in  such  coupons  who  shall  purchase  the  same  for 

any  such   dividends   or   interest    (not   payable   in    the   United    States), 
otherwise  than  from  a  banker  or  another  dealer  in  such  coupons; 
but  in  each  case  the  benefit  of  the  exemption  and  the  deduction  allow- 
able under  this  section  may  be  had  by  complying  with  the  foregoing 
provisions  of  this  paragraph. 

E-26  All  persons,  firms,  or  corporations  undertaking  as  a  matter  of 
business  or  for  profit  the  collection  of  foreign  payments  of  such 
interest  or  dividends  by  means  of  coupons,  checks,  or  bills  of 
exchange  shall  obtain  a  license  from  the  Commissioner  of  Internal 
Revenue,  and  shall  be  subject  to  such  regulations  enabling  the 
Government  to  ascertain  and  verify  the  due  withholding  and  pay- 
ment of  the  income  tax  required  to  be  withheld  and  paid  as  the 
Commissioner  of  Internal  Revenue,  with  the  approval  of  the  Secre- 
tary of  the  Treasury,  shall  prescribe; 

E-27  and  any  person  who  shall  knowingly  undertake  to  collect  such  pay- 
ments as  aforesaid  without  having  obtained  a  license  therefor,  or 
without  complying  with  such  regulations,  shall  be  deemed  guilty  of 
a  misdemeanor  and  for  each  offense  be  fined  in  a  sum  not  exceeding 
$5,000,  or  imprisoned  for  a  term  not  exceeding  one  year,  or  both, 
in  the  discretion  of  the  court. 

E-28  Nothing  in  this  section  shall  be  construed  to  release  a  taxable 
person  from  liability  for  income  tax,  nor  shall  any  contract  entered 
into  after  this  Act  takes  effect  be  valid  in  regard  to  any  Federal 
income  tax  imposed  upon  a  person  liable  to  such  payment. 

E-29  The  tax  herein  imposed  upon  annual  gains,  profits,  and  income 
not  falling  under  the  foregoing  and  not  returned  and  paid  by  virtue 
of  the  foregoing  shall  be  assessed  by  personal  return  under  rules 
and  regulations  to  be  prescribed  by  the  Commissioner  of  Internal 
Revenue  and  approved  by  the  Secretary  of  the  Treasury. 

E-30       The  provisions  of  this  section  relating  to  the  deduction  and  pay- 

50 


ment  of  the  tax  at  the  source  of  income  shall  only  apply  to  the 
normal  tax  hereinbefore  imposed  upon  individuals. 

F.  That  if  any  person,  corporation,  joint-stock  company,  asso-  Paragraph  F 
ciation,  or  insurance  company  liable  to  make  thi£  return  or  pay  the  F-l 

tax  aforesaid  shall  refuse  or  neglect  to  make  a  return  at  the  time  or 
times  hereinbefore  specified  in  each  year,  such  person  shall  be  liable 
to  a  penalty  of  not  less  than  $20  nor  more  than  $1,000. 

Any  person  or  any  officer  of  any  corporation  required  by  law  to  F-2 
make,  render,  sign,  or  verify  any  return  who  makes  any  false  or 
fraudulent  return  or  statement  with  intent  to  defeat  or  evade  the 
assessment  required  by  this  section  to  be  made  shall  be  guilty  of  a 
misdemeanor,  and  shall  be  fined  not  exceeding  $2,000  or  be  im- 
prisoned not  exceeding  one  year,  or  both,  at 'the  discretion  of  the 
court,  with  the  costs  of  prosecution. 

G.  (a)     That  the  normal  tax  hereinbefore  imposed  upon  indi-  Paragraph G 
viduals  likewise  shall  be  levied,  assessed,  and  paid  annually  upon  the  Q.j 
entire  net  'income  arising  or  accruing  from  all  sources  during  the 
preceding  calendar  year  to  every  corporation,  joint-stock  company  or 
association,  and  every  insurance  company,  organized  in  the  United 

States,  no  matter  how  created  or  organized,  not  including  partner- 
ships ; 

but  if  organized,   authorized,   or  existing  under  the  laws  of   any  Q_2 
foreign  country,  then  upon  the  amount  of  net  income  accruing  from 
business  transacted  and  capital  invested  within  the  Uinted  States 
during  such  year : 

Provided,  However,  That  nothing  in  this  section  shall  apply  to  labor,  (1-3 
agricultural,  or  horticultural  organizations,  or  to  mutual  savings  banks 
not  having  a  capital  stock  represented  by  shares,  or  to  fraternal  bene- 
ficiary societies,  orders,  or  associations  operating  under  the  lodge  sys- 
tem or  for  the  exclusive  benefit  of  the  members  of  a  fraternity  itself 
operating  under  the  lodge  system,  and  providing  for  the  payment  of 
life,  sick,  accident,  and  other  benefits  to  the  members  of  such  societies, 
orders,  or  associations  and  dependents  of  such  members,  nor  to  do- 
mestic building  and  loan  associations,  nor  to  cemetery  companies,  organ- 
ized and  operated  exclusively  for  the  mutual  benefit  of  their  members, 
nor  to  any  corporation  or  association  organized  and  operated  exclusively 
for  religious,  charitable,  scientific  or  educational  purposes,  no  part  of 
the  net  income  of  which  inures  to  the  benefit  of  any  private  stockholder 
or  individual,  nor  to  business  leagues,  nor  to  chambers  of  commerce  or 
boards  of  trade,  not  organized  for  profit,  or  no  part  of  the  net  income 
of  which  inures  to  the  benefit  of  the  private  stockholder  or  individual; 
nor  to  any  civic  league  or  organization  not  organized  for  profit,  but 
operated  exclusively  for  the  promotion  of  social  welfare : 

Provided,  Further,  That  there  shall  not  be  taxed  under  this  section  G-4 
any  income  derived  from  any  public  utility  or  from  the  exercise  of 
any  essential  governmental  function  accruing  to  any  State,  Territory, 
or  the  District  of  Columbia,  or  any  political  subdivision  of  a  State, 
Territory,  or  the  District  of  Columbia,  nor  any  income  accruing  to  the 
government  of  the  Philippine  Islands  or  Porto  Rico,  or  of  any  political 
subdivision  of  the  Philippine  Islands  or  Porto  Rico: 

51 


G-5  Provided,    That   whenever    any    State,    Territory,    or   the    District   of 

Columbia,  or  any  political  subdivision  of  a  State  or  Territory,  has, 
prior  to  the  passage  of  this  Act,  entered  in  good  faith  into  a  contract 
with  any  person  or  corporation,  the  object  and  purpose  of  which  is  to 
acquire,  construct,  operate  or  maintain  a  public  utility,  no  tax  shall  be 
levied  under  the  provisions  of  this  Act  upon  the  income  derived  from 
the  operation  of  such  public  utility,  so  far  as  the  payment  thereof  will 
impose  a  loss  or  burden  upon  such  State,  Territory,  or  the  District  of 
Columbia,  or  a  political  subdivision  of  a  State  or  Territory ; 

G-6  but  this  provision  is  not  intended  to  confer  upon  such  person  or  corpo- 

ration any  financial  gain  or  exemption  or  to  relieve  such  person  or 
corporation  from  the  payment  of  a  tax  as  provided  for  in  this  section 
upon  the  part  or  portion  of  the  said  income  to  which  such  person  or 
corporation  shall  be  entitled  under  such  contract. 

G-7  (b)  Such  net  income  shall  be  ascertained  by  deducting  from  the 
gross  amount  of  the  income  of  such  corporation,  joint-stock  com- 
pany or  association,  or  insurance  company,  received  within  the  year 
from  all  sources. 

G-8  (first)  all  the  ordinary  and  necessary  expenses  paid  within  the 

year  in  the  maintenance  and  operation  of  its  business  and  prop- 
erties, including  rentals  or  other  payments  required  to  be  made 
as  a  condition  to  the  continued  use  or  possession  of  property; 

G-9  (second)  all  losses  actually  sustained  within  the  year  and  not 

compensated  by  insurance  or  otherwise,  including  a  reasonable 
allowance  for  depreciation  by  use,  wear  and  tear  of  property, 
if  any ; 

G-10  and  in  the  case  of  mines  a  reasonable  allowance  for  depletion 

of  ores  and  all  other  natural  deposits,  not  to  exceed  5  per  centum 
of  the  gross  value  at  the  mine  of  the  output  for  the  year  for 
which  the  computation  is  made ; 

G-ll  and  in  case  of  insurance  companies  the  net  addition,  if  any, 

required  by  law  to  be  made  within  the  year  to  reserve  funds 
and  the  sums  other  than  dividends  paid  within  the  year  on 
policy  and  annuity  contracts : 

G-12  Provided,  That  mutual  fire  insurance  companies,  requiring  their  mem- 

bers to  make  pjemium  deposits  to  provide  for  losses  and  expenses  shall 
not  return  as  income  any  portion  of  the  premium  deposits  returned 
to  their  policyholders,  but  shall  return  as  taxable  income  all  income 
received  by  them  from  all  other  sources  plus  such  portions  of  the  pre- 
mium deposits  as  are  retained  by  the  companies  for  purposes  other  than 
the  payment  of  losses  and  expenses  and  reinsurance  reserves : 

G-13  Provided,    Further,    That   mutual    marine    insurance    companies    shall 

include  in  their  return  of  gross  income  gross  premiums  collected  and 
received  by  them  less  amounts  paid  for  reinsurance,  but  shall  be  entitled 
to  include  in  deductions  from  gross  income  amounts  repaid  to  policy- 
holders  on  account  of  premiums  previously  paid  by  them  and  interest 
paid  upon  such  amounts  between  the  ascertainment  thereof  and  the 
payment  thereof, 

G-14  And    life    insurance    companies    shall    not    include    as    income    in    any 

year  such  portion  of  any  actual  premium  received  from  any  individual 
policyholder  as  shall  have  been  paid  back  or  credited  to  such  individual 
policy  holder,  or  treated  as  an  abatement  of  premium  of  such  indi- 
vidual policyholder,  within  such  year ; 

52 


(third)  the  amount  of  interest  accrued  and  paid  within  the  year  G-15 
on  its  indebtedness  to  an  amount  of  such  indebtedness  not 
exceeding  one-half  cff  the  sum  of  its  interest  bearing  indebted- 
ness and  its  paid-up  capital  stock  outstanding  at  the  close  of 
the  year,  or  if  no  capital  stock,  the  amount  of  interest  paid 
within  the  year  on  an  amount  of  its  indebtedness  not  exceeding 
the  amount  of  capital  employed  in  the  business  at  the  close 
of  the  year : 

Provided,  That  in  case  of  indebtedness  wholly  secured  by  collateral   Q-16 
the  subject  of  sale  in  ordinary  business  of  such  corporation,  joint-stock 
company,   or  association,  the  total  interest  secured  and  paid  by  such 
company,  corporation,  or  association  within  the  year  on  any  such  in- 
debtedness may  be  deducted  as  a  part  of  its  expense  of  doing  business : 

Provided,  Further,  That  in  the  case  of  bonds  or  other  indebtedness,   G-17 
which    have    been    issued    with    a    guaranty    that    the  'interest    payable 
thereon   shall  be   free   from   taxation,   no   deduction   for   the  payment 
of  the  tax  herein  imposed  shall  be  allowed, 

and  in  the  case  of  a  bank,  banking  association,  loan  or  trust  company,   G*18 
interest  paid  within  the  year  on  deposits  or  on  moneys  received  for 
investment  and  secured  by  interest-bearing  certificates  of  indebtedness 
issued  by  such  a  bank,  banking  association,  loan  or  trust  company; 

(fourth)  all  sums  paid  by  it  within  the  year  for  taxes  imposed  G-19 
under  the  authority  of  the  United  States  or  of  any  State  or 
Territory  thereof,  or  imposed  by  the  Government  of  any  for- 
eign country : 

Provided,  That  in  the  case  of  a  corporation,  joint-stock  company,  Q.9Q 
or  a'ssociation,  or  insurance  company,  organized,  authorized,  or  exist- 
ing under  the  laws  of  any  foreign  country,  such  net  income  shall  be 
ascertained  by  deducting  from  the  gross  amount  of  its  income  accrued 
within  the  year  from  business  transacted  and  capital  invested  within 
the  United  States, 

(first)    all   the  ordinary   and   necessary   expenses   actually   paid   within   O_21 
the  year  out  of  earnings  in  the  maintenance  and  operation  of  its  busi- 
ness and  property  within  the  United  States,  including  rentals  or  other 
payments  required  to  be  made  as  a  conditipn  to  the  continued  use  or 
possession  of  property; 

(second)  all  losses  actually  sustained  within  the  year  in  business  con-  Q_22 
ducted  by  it  within  the  United  States  and  not  compensated  by  insurance 
or  otherwise,  including  a  reasonable  allowance  for  depreciation  by  use, 
wear  and  tear  of  property,  if  any,  and  in  the  case  of  mines  a  reasonable 
allowance  for  depletion  of  ores  and  all  other  natural  deposits,  not  to 
exceed  5  per  centum  of  the  gross  value  at  the  mine  of  the  output  for 
the  year  for  which  the  computation  is  made; 

and  in  case  of  insurance  companies  the  net  addition,  if  any,   required  Q.23 
by  law  to  be  made  within  the  year  to  reserve  funds  and  the  sums  other 
than  dividends  paid  within  the  year  on  policy  and  annuity  contracts: 

Provided,  Further,  That  mutual  fire  insurance  companies  requiring  Q_24 
their  members  to  make  premium  deposits  to  provide  for  losses  and 
expenses  shall  not  return  as  income  any  portion  of  the  premium  de- 
posits returned  to  their  policyholders,  but  shall  return  as  taxable  in- 
come all  income  received  by  them  from  all  other  sources  plus  such 
portions  of  the  premium  deposits  as  are  retained  by  the  companies  for 
purposes  other  than  the  payment  of  losses  and  expenses  and  reinsur- 
ance reserves : 

53 


G-25  Provided,    Further,    That   mutual    marine   insurance    companies    shall 

include  in  their  return  of  gross  income  gross  premiums  collected  and  re- 
ceived by  them  less  amounts  paid  for  reinsurance,  but  shall  be  entitled 
to  include  in  deductions  from  gross  income  amounts  repaid  to  policy- 
holders  on  account  of  premiums  previously  paid  by  them*  and  interest 
paid  upon  such  amounts  between  the  ascertainment  thereof  and  the  pay- 
ment thereof 

G-26  and  life  insurance  companies  shall  not  include  as  income  in  any  year 

such  portion  of  any  actual  premium  received  from  any  individual  policy- 
holder  as  shall  have  been  paid  back  or  credited  to  such  individual  policy- 
holder,  or  treated  as  an  abatement  of  premium  of  such  individual  policy- 
holder,  within  such  year; 

G-27  (third)  the  amount  of  interest  accrued  and  paid  within  the  year  on  its 

indebtedness  to  an  amount  of  such  indebtedness  not  exceeding  the  pro- 
portion of  one-half  of  the  sum  of  its  interest  bearing  indebtedness  and 
its  paid-up  capital  stock  outstanding  at  the  close  of  the  year,  or  if  no 
capital  stock,  the  capital  employed  in  the  business  at  the  close  of  the 
year  which  the  gross  amount  of  its  income  for  the  year  from  business 
transacted  and  capital  invested  within  the  United  States  bears  to  the 
gross  amount  of  its  income  derived  from  all  sources  within  and  with- 
out the  United  States: 

G-28  Provided,   That  in  the  case  of  bonds   or   other  indebtedness  which 

have  been  issued  with  a  guaranty  that  the  interest  payable  thereon  shall 
be  free  from  .taxation,  no  deduction  for  the  payment  of  the  tax  herein 
imposed  shall  be  allowed; 

G-29  (fourth)   all  sums  paid  by  it  within  the  year  for  taxes  imposed  under 

the  authority  of  the  United  States  or  of  any  State  or  Territory  thereof 
or  the  District  of  Columbia. 

G-30  In  the  case  of  assessment  insurance  companies,  whether  domestic 
or  foreign,  the  actual  deposit  of  sums  with  State  or  Territorial 
officers,  pursuant  to  law,  as  additions  to  guarantee  or  reserve  funds 
shall  be  treated  as  being  payments  required  by  law  to  reserve  funds. 

G-31  (c)  The  tax  herein  imposed  shall  be  computed  upon  its  entire 
net  income  accrued  within  each  preceding  calendar  year  ending 
December  thirty-first : 

r  r>2  Provided,  However,  That  for  the  year  ending  December  thirty-first, 

nineteen  hundred  and  thirteen,  said  tax  shall  be  imposed  upon  its  entire 
net  income  accrued  within  that  portion  of  said  year  from  March  first 
to  December  thirty-first,  both  dates  inclusive,  to  be  ascertained  by 
taking  five-sixths  of  its  entire  net  income  for  said  calendar  year : 

G-33  Provided,    Further,    That   any    corporation,    joint-stock    company    or 

association,  or  insurance  company  subject  to  this  tax  may  designate 
the  last  day  of  any  month  in  the  year  as  the  day  of  the  closing  of 
its  fiscal  year  and  shall  be  entitled  to  have  the  tax  payable  by  it  com- 
puted upon  the  basis  of  the  net  income  ascertained  as  herein  provided 
for  the  year  ending  on  the  day  so  designated  in  the  year  preceding 
th  date  of  assessment  instead  of  upon  the  basis  of  the  net  income  for 
the  calendar  year  preceding  the  date  of  assessment; 

G-34  and  it  shall  give  notice  of  the  day  it  has  thus  designated  as  the  closing 

of  its  fiscal  year  to  the  collector  of  the  district  in  which  its  principal 
business  office  is  located  at  any  time  not  less  than  thirty  days  prior 
to  the  date  upon  which  its  annual  return  shall  be  filed. 

G-35  All  corporations,  joint-stock  companies  or  associations,  and  insur- 
ance companies  subject  to  the  tax  herein  imposed,  computing  taxes 

54 


upon  the  income  of  the  calendar  year,  shall,  on  or  before  the  first 
day  of  March,  nineteen  hundred  and .  fourteen,  and  the  first  day  of 
March  in  each  year  thereafter,  and  all  corporations,  joint-stock 
companies  or  associations,  and  insurance  companies,  computing 
taxes  upon  the  income  of  a  fiscal  year  which  it  may  designate  in  the 
manner  hereinbefore  provided,  shall  render  a  like  return  within 
sixty  days  after  the  close  of  its  said  fiscal  year,  and  within  sixty 
days  after  the  close  of  its  fiscal  year  in  each  year  thereafter,  or  in 
the  case  of  a  corporation,  joint-stock  company  or  association, 
or  insurance  company,  organized  or  existing  under  the  laws 
of  a  foreign  country,  in  the  place  where  its  principal  business  is 
located  within  the  United  States,  in  such  form  as  the  Commissioner 
.of  Internal  Revenue,  with  the  approval  of  the  Secretary  of  the 
Treasury,  shall  prescribe,  shall  render  a  true  and  accurate  return 
under  oath  or  affirmation  of  its  president,  vice  president,  or  other 
principal  officer,  and  its  treasurer  or  assistant  treasurer/  to  the 
collector  of  internal  revenue  for  the  district  in  which  it  has  its 
principal  place  of  business,  setting  forth 

(first)  the  total  amount  of  its  paid-up  capital  stock  outstanding,  G-36 
or  if  no  capital  stock,  its  capital  employed  in  business,  at  the 
close  of  the  year; 

(second)  the  total  amount  of  its  bonded  and  other  indebtedness  G-37 
at  the  close  of  the  year  ; 

(third)  the  gross  amount  of  its  income,  received  during  such  G-38 
year  from  all  sources, 

and  if  organized  under  the  laws  of  a  foreign  country  the  gross  G-39 
amount  of  its  income  received  within  the  year  from  business 
transacted  and  capital  invested  within  the  United  States ; 

(fourth)  the  total  amount  of  all  its  ordinary  and  necessary  G-40 
expenses  paid  out  of  earnings  in  the  maintenance  and  operation 
of  the  business  and  properties  of  such  corporation,  joint-stock 
company  or  association,  or  insurance  company  within  the  year, 
stating  separately  all  rentals  or  other  payments  required  to  be 
made  as  a  condition  to  the  continued  use  or  possession  of 
property, 

and  if  organized  under  the  laws  of  a  foreign  country  the  amount  £.41 
so  paid  in  the  maintenance  and  operation  of  its  business  within 
the  United  States; 

(fifth)  the  total  amount  of  all  losses  actually  sustained  during  £.42 
the  year  and  not  compensated  by  insurance  or  otherwise,  stating 
separately  any  amounts  allowed  for  depreciation  of  property, 
and  in  case  of  insurance  companies  the  net  addition,  if  any 
required  by  law  to  be  made  within  the  year  to  reserve  funds 
and  the  sums  other  than  dividends  paid  within  the  year  on 
v  policy  and  annuity  contracts : 

55 


G-43  and  in  case  of  insurance  companies  the  net  addition,  if  any,   required 

by  law  to  be  made  within  the  year  to  reserve  funds  and  the  sums  other 
than  dividends  paid  within  the  year  on  policy  and  annuity  contracts : 

G-44  Provided,   Further,   That  mutual   fire    insurance   companies   requiring 

their  members  to  make  premium  deposits  to  provide  for  losses  and 
expenses  shall  not  return  as  income  any  portion  of  the  premium  de- 
posits returned  to  their  policyholders,  but  shall  return  as  taxable  in- 
come all  income  received  by  them  from  all  other  sources  plus  such  por- 
tions of  the  premium  deposits  as  are  retained  by  the  companies  for 
purposes  other  than  the  payment  of  losses'  and  expenses  and  reinsur- 
ance reserves: 

G-45  Provided,    Further,    That   mutual    marine   insurance    companies    shall 

include  in  their  return  of  gross  income  gross  premiums  collected  and 
received  by  them  less  amounts  paid  for  reinsurance,  but  shall  be  en- 
titled to  include  in  deductions  from  gross  income  amounts  repaid  to 
policyholders  on  account  of  premiums  previously  paid  by  them,  and 
interest  paid  upon  such  amounts  between  the  ascertainment  thereof  and 
the  payment  thereof 

G-46  anc^  ^e  msurance  companies  shall  not  include  as  income  in  any  year 

such  portion  of  any  actual  premium  received  from  any  individual 
policyholder  as  shall  have  been  paid  back  or  credited  to  such  indi- 
vidual policyholder,  or  treated  as  an  abatement  of  premium  of  such 
individual  policyholder,  within  such  year ; 

G-47  and  in  case   of  a  corporation,   joint-stock  company  or   association,   or 

insurance  company,  organized  under  the  laws  of  a  foreign  country,  all 
losses  actually  sustained  by  it  during  the  year  in  business  conducted 
by  it  within  the  United  States,  not  compensated  by  insurance  or  other- 
wise, stating  separately  any  amounts  allowed  for  depreciation  of 
property, 

G-48  and  in  case  of  insurance  companies   the   net   addition,   if   any,   required 

by  law  to  be  made  within  the  year  to  reserve  funds  and  the  sums  other 
than  dividends  paid  within  the  year  on  policy  and  annuity  contracts : 

G-49  Provided,   Further,  That  mutual  fire  insurance  companies   requiring 

their  members  to  make  premium  deposits  to  provide  for  losses  and 
expenses  shall  not  return  as  income  any  portion  of  the  premium  de- 
posits returned  to  their  policyholders,  but  shall  return  as  taxable  income 
all  income  received  by  them  from  all  other  sources  plus  such  portions 
of  the  premium  deposits  as  are  retained  by  the  companies  for  purposes 
other  than  the  payment  of  losses  and  expenses  and  reinsurance  reserves : 

G-50  Provided,   Further,   That   mutual   marine   insurance   companies   shall 

include  in  their  return  of  gross  income  gross  premiums,  collected- and  re- 
ceived by  them  less  amounts  paid  for  reinsurance,  but  shall  be  entitled 
to  include  in  deductions  from  gross  income  amounts  repaid  to  policy- 
holders  on  account  of  premiums  previously  paid  by  them  and  interest 
paid  upon  such  amounts  between  the  ascertainment  thereof  and  the 
payment  thereof 

u-51  and  life  insurance  companies  shall  not  include  as  income  in  any  year 

•  such  portion  of  any  actual  premium  received  from  any  individual  policy- 

holder  as  shall  have  been  paid  back  or  credited  to  such  individual  policy- 
holder,  or  treated  as  an  abatement  of  premium  of  such  individual 
policyholder,  within  such  year; 

G-52  (sixth)   the  amount  of  interest,  accrued  and  paid  within  the 

year  on  its  bonded  or  other  indebtedness  not  exceeding  one- 
half  of  the  sum  of  its  interest  bearing  indebtedness  and  its 
paid-up  capital  stock,  outstanding  at  the  close  of  the  year, 

G-53  or  if  no  capital  stock,  the  amount  of  interest  paid  within  the 

year  on  an  amount  of  indebtedness  not  exceeding  the  amount 
of  capital  employed  in  the  business  at  the  close  of  the  year, , 

56 


and  in  the  case  of  a  bank,  banking  association,  or  trust  com-  G-54 
pany,  stating  separately  all  interest  paid  by  it  within  the  year  on 
deposits ; 

or  in  case  of  a  corporation,  joint-stock  company  or  association,  G-55 
or  insurance  company,  organized  under  the  laws  of  a  foreign 
country,  interest  so  paid  on  its  bonded  or  other  indebtedness 
to  an  amount  of  such  bonded  or  other  indebtedness  not  exceed- 
ing the  proportion  of  its  paid-up  capital  stock  outstanding  at 
the  close  of  the  year, 

or  if  no  capital  stock,  the  amount  of  capital  employed  in  the  G-56 
business  at  the  close  of  the  year,  which  the  gross  amount  of  its 
income  for  the  year  from  business  transacted  and  capital 
invested  within  the  United  States  bears  to  the  gross  amount  of 
its  income  derived  from  all  sources  within  and  without  the 
United  States; 

(seventh)    the  amount  paid  by   it  within  the  year   for  taxes  G-57 
imposed  under  the  authority  of  the  United  Stktes  and  separately 
the  amount  so  paid  by  it  for  taxes  imposed  by  the  Government         v 
of  any  foreign  country; 

(eighth)  the  net  income  of  such  corporation,  joint-stock  com-   G-58 
pany  or  association,  or  insurance  company,  after  making  the 
deductions  in  this  subsection  authorized. 

All   such   returns   shall    as    received   be   transmitted   forthwith   by  G-59 
the  collector  to  the  Commissioner  of  Internal  Revenue. 

All  assessments  shall  be  made  and  the  several  corporations,  joint-  G-60 
stock  companies  or  associations,  and  insurance  companies  shall  be 
notified  of  the  amount  for  which  they  are  respectively  liable  on  or 
before  the  first  day  of  June  of  each  successive  year,  and  said  assess- 
ment shall  be  paid  on  or  before  the  thirtieth  day  of  June : 

Provided,  That  every  corporation,  joint-stock  company  or  association,  G-61 
and  insurance  company,  computing  taxes  upon  the  income  of  the  fiscal 
year  which  it  may  designate  in  the  manner  hereinbefore  provided,  shall 
pay  the  taxes  due  under  its  assessment  within  one  hundred  and  twenty 
days  after  the  date  upon  which  it  is  required  to  file  its  list  or  return 
of  income  for  assessment; 

except  in  cases  of  refusal  or  neglect  to  make  such  return,  and  in  cases  G-62 
of  false  or  fraudulent  returns,  in  which  cases  the  Commissioner  of 
Internal  Revenue  shall,  upon  the  discovery  thereof,  at  any  time  within 
three  years  after  said  return  is  due,  make  a  return  upon  information 
obtained  as  provided  for  in  this  section  or  by  existing  law,  and  the 
assessment  made  by  the  Commissioner  of  Internal  Revenue  thereon 
shall  be  paid  by  such  corporation,  joint-stock  company  or  association, 
or  insurance  company  immediately  upon  notification  of  the  amount  of 
such  assessment; 

and  to  any  sum  or  sums  due  and  unpaid  after  the  thirtieth  day  of  G-63 
June  in  any  year,  or  after  one  hundred  and  twenty  days  from  the  date 
on  which  the  return  of  income  is  required  to  be  made  by  the  taxpayer, 
and  after  ten  days'  notice  and  demand  thereof  by  the  collector,  there 
shall  be  added  the  sum  of  5  per  centum  on  the  amount  of  tax  unpaid 
and  interest  at  the  rate  of  1  per  centum  per  month  upon  said  tax  from 
the  time  the  same  becomes  due. 

57 


G-64  (d)  When  the  assessment  shall  be  made,  as  provided  in  this 
section,  the  returns,  together  with  any  corrections  thereof  which 
may  have  been  made  by  the  commissioner,  shall  be  filed  in  the  office 
of  the  Commissioner  of  Internal  Revenue  and  shall  constitute  public 
records  and  be  open  to  inspection  as  such : 

Q_gg  Provided,  That  any  and  all  such  returns  shall  be  open  to  inspection 

only  upon  the  order  of  the  President,  under  rules  and  regulations  to 
be  prescribed  by  the  Secretary  of  the  Treasury  and  approved  by  the 
President : 

G-66  Provided,  Further,  That  the  proper  officers  of  any  State  imposing  a 

general  income  tax  may,  upon  the  request  of  the  governor  thereof,  have 
access  to  said  returns  or  to  an  abstract  thereof,  showing  the  name  and 
income  of  each  such  corporation,  joint-stock  company,  association  or 
insurance  company,  at  such  times  and  in  such  manner  as  the  Secretary 
of  the  Treasury  may  prescribe. 

G-67  If  anY  °f  tne  corporations,  joint-stock  companies  or  associations, 
or  insurance  companies  aforesaid,  shall  refuse  or  neglect  to  make  a 
return  at  the  time  or  times  hereinbefore  specified  in  each  year,  or 
shall  render  a  false  or  fraudulent  return,  such  corporation,  joint- 
stock  company  or  association,  or  insurance  company  shall  be  liable 
to  a  penalty  of  not  exceeding  $10,000. 

Paragraph  H       H-    That  the  wor<^  "State"  or  "United  States"  when  used  in  this 
ij  *    section   shall  be   construed  to   include  any  Territory,   Alaska,   the 
District  of  Columbia,  Porto  Rico,  and  the  Philippine  Islands,  when 
such  construction  is  necessary  to  carry  out  its  provisions. 

Paragraph  I       1.     That  sections  thirty-one  hundred  and  sixty-seven,  thirty-one 

I_l   hundred  and  seventy-two,  thirty-one  hundred  and  seventy-three,  and 

thirty-one  hundred  and  seventy-six  of  the  Revised  Statutes  of  the 

United  States  as  amended  are  hereby  amended  so  as  to  read  as 

follows : 

R.  S.  Sec.  "Sec.  3167.  It  shall  be  unlawful  for  any  collector,  deputy  col- 
3167  lector,  agent,  clerk,  or  other  officer  or  employee  of  the  United  States 
to  divulge  or  to  make  known  in  any  manner  whatever  not  provided 
by  law  to  any  person  the  operations,  style  of  work,  or  apparatus  of 
any  manufacturer  or  producer  visited  by  him  in  the  discharge  of  his 
official  duties,  or  the  amount  of  source  of  income,  profits,  losses, 
expenditures,  or  any  particular  thereof,  set  forth  or  disclosed  in 
any  income  return  by  any  person  or  corporation,  or  to  permit  any 
income  return  or  copy  thereof  or  any  book  containing  any  abstract 
or  particulars  thereof  to  be  seen  or  examined  by  any  person  except 
as  provided  by  law ; 

and  it  shall  be  unlawful  for  any  person  to  print  or  publish  in  any 
manner  whatever  not  provided  by  law  any  income  return  or  any 
part  thereof  or  the  amount  or  source  of  income,  profits,  losses,  or 
expenditures  appearing  in  any  income  return; 

and  any  offense  against  the  foregoing  provision  shall  be  a  misde- 
meanor and  be  punished  by  a  fine  not  exceeding  $1,000  or  by 
imprisonment  not  exceeding  one  year,  or  both,  at  the  discretion  of 
the  court; 

58 


and  if  the  offender  be  an  officer  or  employee  of  the  United  States 
he  shall  be  dismissed  from  office  and  be  incapable  thereafter  of 
holding  any  office  under  the  Government. 

(Sec.  3172.     Every  collector  shall,  from  time  to  time,  cause  his  R.  S.  Sec. 
deputies  to  proceed  through  every  part  of  his  district  and  inquire        3172 
after  and  concerning  all  persons  therein  who  are  liable  to  pay  any 
internal-revenue  tax,  and  all  persons  owning  or  having  the  care  and 
management  of  any  objects  liable  to  pay  any  tax,  and  to  make  a  list 
of  such  persons  and  enumerate  said  objects. 

(Sec.  3173.  It  shall  be  the  duty  of  any  person,  partnership,  firm,  R.  S. Sec. 
association,  or  corporation,  made  liable  to  any  duty,  special  tax,  3173 
or  other  tax  imposed  by  law,  when  not  otherwise  provided  for,  in 
case  of  a  special  tax,  on  or  before  the  thirty-first  day  of  July  in 
each  year,  in  case  of  income  tax  on  or  before  the  first  day  of  March 
in  each  year,  and  in  other  cases  before  the  day  on  which  the  taxes 
accrue,  to  make  a  list  or  return,  verified  by  oath  or  affirmation,  to 
the  collector  or  a  deputy  collector  of  the  district  where  located,  of 
'the  articles  or  objects,  including  the  amount  of  annual  income 
charged  with  a  duty  or  tax,  the  quantity  of  goods,  wares,  and  mer- 
chandise made  or  sold  and  charged  with  a  tax,  the  several  rates  and 
aggregate  amount,  according  to  the  forms  and  regulations  to  be 
prescribed  by  the  Commissioner  of  Internal  Revenue,  with  the 
approval  of  the  Secretary  of  the  Treasury,  for  which  such  person, 
partnership,  firm,  association,  or  corporation  is  liable : 

Provided,  That  if  any  person  liable  to  pay  any  duty  or  tax,  or  own- 
ing, possessing,  or  having  the  care  or  management  of  property,  goods, 
wares  and  merchandise,  articles  or  objects  liable  to  pay  any  duty,  tax, 
or  license,  shall  fail  to  make  and  exhibit  a  list  or  return  required  by 
law,  but  shall  consent  to  disclose  the  particulars  of  any  and  all  the 
property,  goods,  wares,  and  merchandise,  articles,  and  objects  liable  to 
pay  any  duty  or  tax,  or  any  business  or  occupation  liable  to  pay  any 
tax  as  aforesaid,  then,  and  in  that  case,  it  shall  be  the  duty  of  the 
collector  or  deputy  collector  to  make  such  list  or  return,  which,  being 
distinctly  read,  consented  to,  and  signed  and  verified  by  oath  or  affirma- 
tion by  the  person  so  owning,  possessing,  or  having  the  care  and  man- 
agement as  aforesaid,  may  be  received  as  the  list  of  such  person: 

Provided,  Further,  That  in  case  no  annual  list  or  return  has  been 
rendered  by  such  person  to  the  collector  or  deputy  collector  as  required 
by  law,  and  the  person  shall  be  absent  from  his  or  her  residence  or 
place  of  business  at  the  time  the  collector  or  a  deputy  collector  shall 
call  for  the  annual  list  or  return,  it  shall  be  the  duty  of  such  collector 
or  deputy  collector  to  leave  at  such  place  of  residence  or  business,  with 
some  one  of  suitable  age  and  discretion,  if  such  be  present,  otherwise 
to  deposit  in  the  nearest  post  office,  a  note  or  memorandum  addressed 
to  such  person,  requiring  him  or  her  to  render  to  such  collector  or 
deputy  collector  the  list  or  return  required  by  law  within  ten  days  from 
the  date  of  such  note  or  memorandum,  verified  by  oath  or  affirmation. 

And  if  any  person,  on  being  notified  or  required  as  aforesaid,  shall 
refuse  or  neglect  to  render  such  list  or  return  within  the  time 
required  as  aforesaid,  or  whenever  any  person  who  is  required  to 
deliver  a  monthly  or  other  return  of  objects  subject  to  tax  fails  to 
do  so  at  the  time  required,  or  delivers  any  return  which,  in  the 
opinion  of  the  collector,  is  false  or  fraudulent,  or  contains  any 
undervaluation  or  understatement,  it  shall  be  lawful  for  the  collector 

59 


to  summon  such  person,  or  any  other  person  having  possession, 
custody,  or  care  of  books  of  account  containing  entries  relating  to 
the  business  of  such  person,  or  any  other  person  he  may  deem 
proper,  to  appear  before  him  and  produce  such  books,  at  a  time  and 
place  named  in  the  summons,  and  to  give  testimony  or  answer 
interrogatories,  under  oath,  respecting  any  objects  liable  to  tax  or 
the  returns  thereof. 

The  collector  may  summon  any  person  residing  or  found  within  the 
State  in  which  his  district  lies;  and  when  the_ person  intended  to  be 
summoned  does  not  reside  and  cannot  be  found  within  such  State, 
he  may  enter  any  collection  district  where  such  person  may  be  found 
and  there  make  the  examination  herein  authorized.  And  to  this  end 
he  may  there  exercise  all  the  authority  which  he  might  lawfully 
exercise  in  the  district  for  which  he  was  commissioned. 

R.  S.  Sec.  "Sec.  3176.  When  any  person,  corporation,  company,  or  associa- 
3176  tion  refuses  or  neglects  to  render  any  return  or  list  required  by  law, 
or  renders  a  false  or  fraudulent  return  or  list,  the  collector  or  any 
deputy  collector  shall  make,  according  to  the  best  information  which 
he  can  obtain,  including  that  derived  from  the  evidence  elicited  by 
the  examination  of  the  collector,  and  on  his  own  view  and  informa- 
tion, such  list  or  return,  according  to  the  form  prescribed,  of  the 
income,  property,  and  objects  liable  to  tax  owned  or  possessed  or 
under  the  care  or  management  of  such  person  or  corporation,  com- 
pany or  association,  and  the  Commissioner  of  Internal  Revenue  shall 
assess  all  taxes  not  paid  by  stamps,  including  the  amount,  if  any,  due 
for  special  tax,  income  or  other  tax, 

and  in  case  of  any  return  of  a  false  or  fraudulent  list  or  valua- 
tion intentionally  he  shall  add  100  per  centum  to  such  tax; 
and  in  case  of  a  refusal  or  neglect,  except  in  cases  of  sickness 
or  absence,  to  make  a  list  or  return,  or  to  verify  the  same  as 
aforesaid,  he  shall  add  50  per  centum  to  such  tax 

In  case  of  neglect  occasioned  by  sickness  or  absence  as  afore- 
said, the  collector  may  allow  such  further  time  for  making  and 
delivering  such  list  or  return  as  he  may  deem  necessary,  not  exceed- 
ing thirty  days. 

The  amount  so  added  to  the  tax  shall  be  collected  at  the  same 
time  and  in  the  same  manner  as  the  tax  unless  the  neglect  or  falsity 
is  discovered  after  the  tax  has  been  paid,  in  which  case  the  amount 
so  added  shall  be  collected  in  the  same  manner  as  the  tax ; 

and  the  list  or  return  so  made  and  subscribed  by  such  collector  or 
deputy  collector  shall  be  held  prima  facie  good  and  sufficient  for  all* 
legal  purposes." 

Paragraph  J  J.  That  it  shall  be  the  duty  of  every  collector  of  internal  revenue, 
j_j  to  whom  any  payment  of  any  taxes  other  than  the  tax  represented 
by  an  adhesive  stamp  or  other  engraved  stamp  is  made  under  the 
provisions  of  this  section,  to  give  to  the  person  making  such  payment 
a  full  written  or  printed  receipt,  expressing  the  amount  paid  and 
the  particular  account  for  which  such  payment  was  made; 


60 


and  whenever  such  payment  is  made  such  collector  shall,  if  required,  J-2 
give  a  separate  receipt  for  each  tax  paid  by  any  debtor,  on  account 
of -payments  made  to  or  to  be  made  by  him  to  separate  credits  in  such 
form  that  such  debtor  can  conveniently  produce  the  same  separately 
to  his  several  creditors  in  satisfaction  of  their  respective  demands  to 
the  amounts  specified  in  such  receipts ; 

and   such   receipts    shall   be   sufficient   evidence   in   favor   of   such  J-3 
debtor  to  justify  him  in  withholding  the  amount  therein  expressed 
from  his  next  payment  to  his  creditor ; 

but  such   creditor  may,  upon  giving  to  his  debtor  a  full  written  J_4 
receipt,  acknowledging  the  payment  to  him  of  whatever  sum  may  be 
actually  paid,  and  accepting  the  amount  of  tax  paid  as  aforesaid, 
(specifying  the  same)  as  a  further  satisfaction  of  the  debt  to  that 
amount,  require  the  surrender  to  him  of  such  collector's  receipt. 

K.    That  jurisdiction  is  hereby  conferred  upon  the  district  courts  Paragraph K 
of  the  United  States  for  the  district  within  which  any  person  sum-  j£_i 
moned  under  this  section  to  appear  to  testify  or  to  produce  books 
shall  reside,  to  compel  such  attendance,  production  of  books,  and 
testimony  by  appropriate  process. 

L.  That  all  administrative,  special,  and  general  provisions  of  Paragraph  L 
law,  including  the  laws  in  relation  to  the  assessment,  remission, 
collection,  and  refund  of  internal-revenue  taxes  not  heretofore  spe- 
cifically repealed  and  not  inconsistent  with  the  provisions  of  this 
section,  are  hereby  extended  and  made  applicable  to  all  the  pro- 
visions of  this  section  and  to  the  tax  herein  imposed. 

M.  That  the  provisions  of  this  section  shall  extend  to  Porto  Rico  Paragraph  M 
and  the  Philippine  Islands:  M-l 

Provided,  That  the  administration  of  the  law  and  the  collection  of   M— 2 
the  taxes  imposed  in  Porto  Rico  and  the  Philippine  Islands  shall  be    _ 
by  the  .appropriate  internal-revenue  officers  of  those  governments,  and 
all  revenues  collected  in  Porto  Rico  and  the  Philippine  Islands  there- 
under shall  accrue  intact  to  the  general  governments,  thereof,  respect- 
ively : 

And   Provided,   Further,  That  the  jurisdiction   in  this   section,   con-   JVI-3 
ferred  upon  the  district  courts  of  the  United  States  shall,  so  far  as  the 
Philippine  Islands  are  concerned,  be  vested  in  the  courts  of  the  first 
instance  of  said  islands: 

And  Provided,  Further,  That  nothing  in  this  section  shall  be  held  to   M-4 
exclude  from  the  computation  of  the  net  income  the  compensation  paid 
any  official  by  the  governments  of  the  District  of  Columbia,  Porto  Rico 
and  the  Philippine  Islands  or  the  political  subdivisions  thereof. 

N.    That  for  the  purpose  of  carrying  into  effect  the  provisions  of  Paragraph  N 
Section  11  of  this  Act,  and  to  pay  the  expenses  of  assessing  and  col-  ?J    i 
lecting  the  income  tax  therein  imposed,  and  to  pay  such  sums  as  the 
Commissioner  of  Internal  Revenue,  with  the  approval  of  the  Secre- 
tary of  the  Treasury,  may  deem  necessary,  for  information,  detection, 
and  bringing  to  trial  and  punishment  persons  guilty  of  violating 
the  provisions  of  this  section,  or  conniving  at  the  same,  in  cases 

61 


where  such  expenses  are  not  otherwise  provided  for  by  law,  there 
is  hereby  appropriated  out  of  any  money  in  the  Treasury  not  other- 
wise appropriated  for  the  fiscal  year  ending  June  thirtieth,  nineteen 
hundred  and  fourteen,  the  sum  of  $800,000  and  the  Commissioner 
of  Internal  Revenue,  with  the  approval  of  the  Secretary  of  the 
Treasury,  is  authorized  to  appoint  and  pay  from  this  appropriation 
all  necessary  officers,  agents,  inspectors,  deputy  collectors,  clerks, 
messengers  and  janitors,  and  to  rent  such  quarters,  purchase  such 
supplies,  equipment,  mechanical  devices,  and  other  articles  as  may 
be  necessary  for  employment  or  use  in  the  District  of  Columbia  or 
any  collection  district  in  the  United  States,  or  any  of  the  Territories 
thereof  : 

N-2  Provided,  That  no  agent  paid  from  this  appropriation  shall  receive 

compensation  at  a  rate  higher  than  that  now  received  by  traveling 
agents  on  accounts  in  the  Internal  Revenue  Service,  and  no  inspector, 
shall  receive  a  compensation  higher  than  $5  a  day  and  $3  additional  in 
lieu  of  subsistence,  and  no  deputy  collector,  clerk,  messenger,  or  other 
employee  shall  be  paid  at  a  rate  of  compensation  higher  than  the  rate 
now  being  paid  for  the  same  or  similar  work  in  the  Internal  Revenue 
Service. 

N-3  In  the  office  of  the  Commissioner  of  Internal  Revenue  at  Wash- 
ington, District  of  Columbia  there  shall  be  appointed  by  the  Com- 
missioner of  Internal  Revenue,  with  the  approval  of  the  Secretary 
of  the  Treasury  one  additional  deputy  commissioner,  at  a  salary  of 
$4,000  per  annum  ; 

N-4  two  heads  of  divisions,  whose  compensation  shall  not  exceed  $2,500 
per  annum; 


N-5  and  such  other  clerks,  messengers,  and  employees,  and  to  rent  such 
quarters  and  to  purchase  such  supplies  as  may  be  necessary: 

N-6  Provided,  That  for  a  period  of  two  years  from  and  after  the  passage 

of  this  Act  the  force  of  agents,  deputy  collectors,  inspectors,  and  other 
employees  not  including  the  clerical  force  below  the  grade  of  chief  of 
division  employed  in  the  Bureau  of  Internal  Revenue  in  the  city  of 
Washington,  District  of  Columbia,  authorized  by  this  section  of  this 
Act,  shall  be  appointed  by  the  Commissioner  of  Internal  Revenue, 
with  the  approval  of  the  Secretary  of  the  Treasury,  under  such  rules 
and  regulations  as  may  be  fixed  by  the  Secretary  of  the  Treasury  to 
insure  faithful  and  competent  service,  and  with  such  compensation  as 
the  Commissioner  of  Internal  Revenue  may  fix,  with  the  approval  of 
the  Secretary  of  the  Treasury,  within  the  limitations  herein  prescribed  : 

N-7  Provided,  Further,  That  the  force  authorized  to  carry  out  the  pro- 

visions of  Section  11  of  this  Act,  when  not  employed  as  herein  pro- 
vided, shall  be  employed  on  general  internal-revenue  work. 

SECTION  IV. 
(Matter  omitted  relates  to  tariff  only.) 


Paragraph  S       S.     *     *     *     Provided,  Further,  That  all  excise  taxes  upon  cor- 

S-1    porations  imposed  by  section  thirty-eight,  that  have  accrued  or  have 

been  imposed  for  the  year  ending  December  thirty-first,  nineteen 

hundred  and  twelve,  shall  be  returned,  assessed,  and  collected  in  the 

62 


same  manner,  and  under  the  same  provisions,  liens,  and  penalities 
as  if  section  thirty-eight  continued  in  full  force  and  effect : 

And  Provided,  Further,  That  a  special  excise  tax  with  respect  to  the  S-2 
carrying  on  or  doing  of  business,  equivalent  to  1  per  centum  upon  their 
entire  net  income  shall  be  levied,  assessed,  and  collected  upon  corpora- 
tions, joint-stock  companies,  or  associations,  and  insurance  companies, 
of  the  character  described  in  section  thirty-eight  of  the  Act  of  August 
fifth,  nineteen  hundred  and  nine,  for  the  period  from  January  first  to 
February  twenty-ninth,  nineteen  hundred  and  thirteen,  both  dates  in- 
clusive, which  said  tax  shall  be  computed  upon  one-sixth  of  the  entire 
net  income  of  said  corporations,  joint-stock  companies  or  associations, 
and  insurance  companies,  for  said  year,  said  net  income  to  be  ascer- 
tained in  accordance  with  the  provisions  of  subsection  G  of  section 
two  of  this  Act: 

Provided,  Further,  That  the  provisions  of  said  section  thirty-eight  of  S-3 
the  Act  of  August  fifth,  nineteen  hundred  and  nine,  relative  to  the  col- 
lection of  the  tax  therein  imposed,  shall  remain  in  force  for  the  col- 
lection of  the  excise  tax  herein  provided,  but  for  the  year  nineteen 
hundred  and  thirteen  it  shall  not  be  necessary  to  make  more  than  one 
return  and  assessment  for  all  the  taxes  imposed  herein  upon  said  cor- 
porations, joint-stock  companies  or  associations,  and  insurance  com- 
panies, either  by  way  of  income  or  excise,  which  return  or  assessment 
shall  be  made  at  the  times  and  in  the  manner  provided  in  this  Act; 

but  the  repeal  of  existing  laws  or  modifications  thereof  embraced  in   S-4 
this  Act  shall  not  affect  any  act  done,  or  any  right  accruing  or  accrued, 
or  any  suit  or  proceeding  had  or  commenced  in  any  civil  case  before 
the  said  repeal  or  modification; 

but  all  rights   and  liabilities  under  said  laws  shall  continue  and  may   S-5 
be  enforced  in  the  same  manner  as  if  said  repeal  or  modifications  had 
not  been  made. 

Any  offenses  committed  and  all  penalties  or  forfeitures  or  lia-  S-6 
bilities  incurred  prior  to  the  passage  of  this  Act  under  any  statute 
embraced  in  or  changed,  modified,  or  repealed  by  this  Act  may  be 
prosecuted  or  punished  in  the  same  manner  and  with  the  same  effect 
as  if  this  Act  had  not  been  passed. 

No  Acts  of  limitation  now  in  force,  whether  applicable  to  civil  S-7 
causes  and  proceedings  or  to  the  prosecution  of  offenses  or  for  the 
recovery  of  penalties  or  forfeitures  embraced  in  or  modified,  changed, 
or  repealed  by  this  Act,  shall  be  affected  thereby  so  far  as  they 
affect  any  suits,  proceedings,  or  prosecutions,  whether  civil  or 
criminal,  for  causes  arising  or  acts  done  or  committed  prior  to  the 
passage  of  this  Act,  which  may  be  commenced  and  prosecuted  within 
the  same  time  and  with  the  same  effect  as  if  this  Act  had  not  been 
passed. 

T.     If  any  clause,  sentence,  paragraph,  or  part  of  this  Act  shall   Paragraph? 
for  any  reason  be  adjudged  by  any  court  of  competent  jurisdiction  T_l 
to  be  invalid,  such  judgment  shall  not  affect,  impair  or  invalidate  the 
remainder  of  said  Act,  but  shall  be  confined  to  its  operation  to  the 
clause,  sentence,  paragraph,  or  part  thereof  directly  involved  in  the 
controversy  in  which  such  judgment  shall  have  been  rendered. 

U.    That  unless  otherwise  herein  specially  provided,  this  Act  shall  Paragraph  U 
take  effect  on  the  day  following  its  passage.  U-l 

Approved,  9:10  p.  m.,  October  3,  1913. 

63 


United  States 

Treasury  Department 

Forms 

FOR     CLAIMING 

Exemptions  and  Deductions 

Annual  and  Monthly  Return 

on  Income  of  Persons 

and  Corporations 


FOBM  OF  CERTIFICATE  TO  BE  PRESENTED  WITH  COUPONS  OR  INTEREST  ORDERS  STATING'  WHETHER  OR 
NOT  EXEMPTION  IS  CLAIMED  UNDEK  PARAGRAPH  C,  SECTION  2,  OF  THE  FEDERAL  INCOME  TAX  LAW. 

r  do  solemnly  declare  that  I, _ „ 

-a  citizen  or  resident  of  the  United  States,  and  residing  at 

••»•«  (Give  full  a*lrra».) 

am  the  owner  of  $ bonds  of  the  denomination  of  $ each^ 

Nos - - -• - - - 

of  the  .... -- 

(Give  name  ol  debtor.) 

known  as „ bonds,  from  which  were  detached 

(Describe  the  particular  feme  at  bond*.) 

the  accompanying  interest  coupons,  due ,  191....,  amounting  to 

$ ,  or  upon  which  there  matured ,  191 — ,"$ — 

of  registered  interest. 

1  {  do  not  f  now  claim  with  respect  to  the  income  represented  by  said  interest,  the  benefit 

of  a  deduction  of  $-_ allowed  under  paragraph  O,  Section  II,  of  the  Federal 

Income  Tax  Law,  the  total  exemption  to  which  I  am  entitled  thereunder  beVng  $ _ _ 

Date, ,  191 .         Name, 

FORM  OF  CERTIFIfcSTE  TO  BE  ATTACHED  TO   INTEREST  COUPONS  IN   CASES  WHERE  THE  COLLECTING 
AGENT'S  CERTIFICATE  IS  SUBSTITUTED  FOR  THE  CERTIFICATE  OF  THE  OWNERS. 

The  Owner's  Certificate,  of  which  the  following  Certificate  Id  the  counterpart,  and  bean  the  same  number  aa  this  Certificate,  will  be  lent  by  the  collecting  agent 
direct  to  the  OommiMioner  of  Internal  Revenue,  at  Waihlngton,  u  prescribed  by  regulation.. 

No... 

I  (we), ,  do  solemnly  declare  that  the  owner  of  $ „ 

(Name  of  collecting  agent. ) 

bonds  of  the .: _ — ,  from  which  were  detached  the 

(Description  of  i*rae.)  (Name  of  debtor  organization.) 

accompanying  interest  coupons  due .\  191    ,  amounting  to  $.^ ,  has  filed  with  me  (us) 

a  duly  executed  certificate  tilled  up  in  accordance  with  Treasury  Regulations  of  October  25, 1913,  Form  No , 

which  certificate  has  been  indorsed  by  me  (us)  as  follows: 

"Owner's  Certificate  No: ,191    ,"  and  in 

(Name  of  collecting  agency.  (Date.) 

which  the  said  owner  ^°J»  not}  claim,  with  respect  to  the  income  represented  by  said  interest,  the  benefit  of  a  deduction  of 

$ ,  allowed  under  Paragraph  C,  Section  II,  of  the  Federal  Income  Tax  Law,  the  total  exemption  to  which 

said  owner  now  claims  to  be  entitled  thereunder  being  $ __,__ .,  and  I  (we)  do  hereby  promise  and  pledge 

{  ourse'lves  }  to  f°rwart'  'he  above-described  certificate  executed  by  the  owners  as  stated  and  dated ,  191    , 

to  the  Commissioner  of  Internal  Revenue,  at  Washington,  D.  C.,  not  later  than  the  20th  day  of  next  month,  in  accordance  with 
Treasury  Regulations. 

Signature  of  Collecting 'Agent :  . 

Date ,  191  Address: 

CERTIFICATE  TO  BE  FURNISHED  BY  ORGANIZATIONS  NOT  SUBJECT  TO  TAX  ON  INTEREST  AT  SOURCE. 
I, ,  the of  the „ _, 

(Oive  name.)  (Olve  official  position.)  (Name  of  organization.) 

a of ,  located  at •. ,  do  solemnly 

(Character  of  organization.)  (State.)  (Host-office  address.) 

declare  that  said Is  the  owner  of  9 

bonds  of  the  denomination  011?°*..°°'. .".I. each,  Nos. ^ 

of  tlie __ . .  known  as 

(Dive  name  of  debtor.)  (Describe  particular  Issue  of  bonds.) 

bonds,  from  which  were  detached  the  accompanying 

coupons,  due ,  191 — ,  amounting  to  9 ,  or  upon  which 

there  matured ,  191....,  9 of  registered  Interest,  and  that 

under  the  provisions  of  the  Income-tax  law  of  October  3,  1913,  said  interest  Is  exempt  from 
the  payment  of  taxes  collectible  at  the  source,  which  exemption  is  hereby  claimed. 

Date ,  191  Name 

(Official  position.) 

Address Of.. 

(Post  office.)  (Name  of  organization.) 

FORM  OF  CERTIFICATE  TO  BE  ATTACHED  TO  INTEREST  COUPONS  IN  CASES  WHERE  THE  COLLECTING 
AGENT'S  CERTIFICATE  IS  SUBSTITUTED  FOR  THE  CERTIFICATE  OF  THE  OWNERS. 

(When  owner  la  a  domestic  organization  not  subject  to  taxes  on  Income  at  source. )  ' 

(The  owner's  certificate,  of  which  the  following  certificate  ia  the  counterpart,  and  bears  the  same  number  aa  this  certificate,  will  be  sent  by  the 
collf  rllni  agent  direct  to  the  Commissioner  of  Internal  Revenue,  at  Washington,  aa  prescribed  by  regulations.) 

No _ 

I  (we) do  solemnly  declare  that  the  owner  of  $ _. bonds  of 

(Name  of  collecting  agent.) 

the -•- ,  from  which  were  detached  the  accompanying  interest  coupons  due ,  191.., 

(Name  of  debtor  organization.)  (Maturity.) 

amounting  to  $ ,  has  filed  with  me  (us)  a  duly  executed  certificate  filled  up  in' accordance  with  Treasury  Regula- 
tions of  October  25,  1913,  Form  No.  1001,  which  certificate  has  been  indorsed  by  me  (us)  as  lollows:  "Owner's  certificate 

No , _.L ,  ...; ,. ,  191..."  and  that  under  the 

(Name  of  collecting  agency.)  (Date.)  _ 

provisions  of  the  income-tax  law  of  October  3,  1913,  said  interest  is  exempt  from  the  payment  of  taxes  colle6tit>le  at  the  source, 
which  exemption  is  hereby  claimed,  and  I  (we)  do  hereby  promise  and  pledge  { {J^llves  }  *°  f°rward  l^e  above-described  cer- 
tificate executed  by  the  owners  as  stated  and  dated ,  191..,  to  the  Commissioner  of  Internal  Revenue, 

at  Washington,  D.  C.,  not  later  than  the  20th  day  of  next  month,  in  accordance  writ/  Treasury  Regulations. 

Signature  of  collecting  agent,  

Date, ,  191..  Address, 


65 


1003. 


ill 

Ill 


FORM    Of   CERTIFICATE   TO    BE    PRESENTED    WITH    COUPONS    OR    INTEREST    ORDERS    WHEN    NOT 
ACCOMPANIED  BT  CERTIFICATE  OF  OWNERS. 


I  .'.,  the - of  the -. , 

"(Nanie)   ~"  (Official  position.)  (Bank  or  collecting  agency.) 

Of  ,  do  solemnly  declare  that  said  — _ _ 

(Address  V  (Collecting  agency.) 

has  (or  have)  purchased  or  accepted  for  collection  the  accompanying  coupons  or  interest  orders 

amounting  to  $ ,  and  which  represent  Interest  matured  on  9 of  bonds  of  the 

__  f  and  that _ received  said  coupons  or 

(NameoTdebtoV.)  (Collecting  agency.) 

orders  for  registered  interest  from '. ,  of. , 

(Name  of  party  from  whom  received.)  (Address  of  said  party.) 

and   that  no  certificate  of  ownership  accompanied  said   coupons  or  interest  orders,  and 

_ _, hereby  acknowledges  responsibility  of  withholding  therefrom  the 

1  iScome*tt«of  i  per  cent,  in  accordance  with  the  regulations  of  the  Treasury  Department. 


norma 


Form 


H 
III 


3' 


I 


Form 
1003  a 


HI 

M- 
ili 
If 


Name • 

(Collecting  agency.) 


By  __   _      ___ 

(Signature  of  officer  Uuly  authorized  to  sign,  and  his  official  posttkm.) 

AddresS  -----------  .........        -  --------- 


FORM  OF  CERTIFICATE  TO  BE  FILLED  OUT  AND  SIGNED  BT  MEMBERS  OF  PARTNERSHIPS. 


,  a  member  of  the  firm  or  partnership  of 

..,  of. ,  and  residing  at.... 


(Give  full  address.) 

bonds 


do  solemnly  declare  that  the  said  partnership  is  the  owner  of  f bonds  Of  the 

denomination  of  9 each,  Nos. .. . 


of  the  . 


known  as  ------------------------------  bonds,  from  which  were  detached  the  accompanying 

Interest  coupons,  due_  ....................  ,  191...,  amounting  to  9  ________________________  ,  or  upon  which  there 

matured  __________________________  ,  191...,  9  .....................  —  of  registered  Interest,  and  that  the  name  and 


__  names  of  the  individual  members  thereof,  and 

sr 


address  of  said  .firm  or  partnership,  and  the 

thelf  places  of  residence,  are  as  follows  :  Addrew: 


(Name  of  partner  signing.)  (Of  frm  of.) 

Date  ........................  .......  191....  Address  ......   ...........  . 


Form  FORM  OF  CERTIFICATE  TO  BE  PRESENTED  WITH  COUPONS  OR  INTEREST  ORDERS  DETACHED  FROM 
BONDS  OR  OTHER  OBLIGATIONS  OWNED  BT  THOSE  WHO  ARE  BOTH  CITIZENS,  OR  SUBJECTS,  AND 
RESIDENTS  OF  FOREIGN  COUNTRIES. 

I  do  solemnly  declare  that  I  am  not  a  citizen  or  resident  of  the  United  States  of  America, 

but  a  subject  (or  citizen)  of ,  and  that  I  am  the  owner  of  9... _ 

bonds  of  the  denominations  of  9 ,. _ each,  Nos 

to" 


of  the ._ known  as 


(Oivenajne  odebtOT 


_  bonds 

(Describe  the  particular  issue  of  bonds.) 

from  which  were  detached  the  accompanying  coupons,  due_ ,  191 , 

amounting  to  9 ,  or  upon  which  there  matured .,  191_.j, 

9 i ,  of  registered  Interest,  and  that  being  a  nonresident  foreigner,  I  am  exempt 

from  the  Income  tax  Imposed  on  such  Interest  by  the  United  States  Government-  under  the 
law  enacted  October  3,  1913,  and  that  no  citizen  of  the  United  States,  wherever  residing,  or 
foreigner  residing  In  the  United  States,  or  any  of  Its  possessions,  has  any  Interest  In  said 
bonds,  coupon*,  or  Interest. 

Signature  of  owner  of  bonds 

(Giro  full  name.) 

Date  .         191 Address 

(Olve  fall  r^sT-oflWaddre.*.) 


FORM  OF  CERTIFICATR  TO  B8  ATTACHED  TO  INTEREST  COUPONS  IN  CASES  WHERE  THE  COLLECTING 
AGENTS  CERTIFICATE  IS  SUBSTITUTED  FOR  THE  CERTIFICATE  OF  THE  OWNERS. 

(When  Bam  owners  arc  ftrma  or  copartnerships  In  the  TTnltefl  States.) 

wUcfa  the  foUowfnf  certificate  IB  the  counterpart,  and 
agent  direct  to  the  Commissioner  of  Internal  Revenue,  at  Washington,  an  prescribed 


(The  owner's  certificate,  of  wUcfa  the  foUowfnf  certificate  IB  the  counterpart,  and  bears  the  same  number  as  this  certificate,  wffl  be  neat  bjr  the  e 

by  refutations.) 


No 


I  (we)  .....  .....  do  solemnly  declare  that  the  owner  off..  .........  ____  ,  bonds  of 

(Sain,  of  collecting  ag«t.) 

the  ___  .  ___  ,  from  which  were  detached  the  accompanying  interest  coupons 

(Nam.  of  debtor  orgaaU«Uon.) 

da"  ____________________  .  191    »  amounting  to  $  __________  ,  has  filed  with  me  (us)  a  duly  executed  certificate  filled  up  in 

(Maturity.) 

accordance  with  Treasury  Regulations  of  October  25,  1913,  Form  So.  1003,  which  certificate  has  been  indorsed  by  me  (us)  88 
follows:  "Owner's  certificate  No  .....  ____________________  ............  _______  ..........  ,  ----------------------  ,  191    ," 

(Same  of  collecting  ag.ncy.  )  (Date.) 

and  that  the  name  and  address  of  the  firm  or  partnership,  and  the  names  of  the  individual  members  thereof,  and  their  places 
of  residence  were  recorded  on  said  original  certificate,  and  I  (we)  do  hereby  promise  and  pledge  {  {JJ^i^g  }  to  forward  the 
above-described  certificate  executed  by  the  owners  aa  stated  and  dated  __________________  .....  ._,  Ifll    ,  to  the  Commissioner  of 

Internal  Revenue,  at  Washington,  D.  C.,  not  later  than  the  20th  day  of  nert  month,  in  accordance  with  Treasury  BegulatioM. 

Signature  of  collecting  agent,  . 
Date,  ............................  -.  _______  ,191  Address,  ___________  ........  _... 


66 


FORM  OF  CERTIFICATE  TO  BE  ATTACHED  TO  INTEREST  COUPONS  IN  CASES  WHERE  THE  COLLECTING 
AGENT'S  CERTIFICATE  IS  SUBSTITUTED  FOR  THE  CERTIFICATE  OF  THE  OWNERS. 

(The  owner'«  certificate,  of  which  the  foUowtaj  certificate  la  Ihe  counterpart,  and  bean  the  same  number  as  this  certlflc»te.  will  be  nerU  bj  Ux>  e 


t  direct  to  the  Commissioner  of  Internal  Reve 


:  Washington,  as  prescribed  by  regulations.) 


I  (we) dp  solemnly  declare  that  the  owner  of  $. 


bonds  of  the  ....  ....................................  ,  ..........  .  from  which  were  detached  the  accompanying  interest 

......  (N~ame"of  debtor  organization.  ) 

coupons  due  ->  191—,  amounting  to  $  ................  ,  has  filed  with  me  (us)  a  duly  executed 

(Matorltj.) 

certificate  filled  up  in  accordance  with  Treasury  Regulations  of  October  25,  1913,  Form  No.  10M,  which  certificate  has  been 
indorsed  by  me  (us)  as  follows:  "Owner's  certificate  No  .................  ,  ..................................................................  ... 

(Name  of  collecting  agency.) 

___  .............................  __  .......  ,  191...,"  and  that  the  owner  in  said  certificate  declares  that,  being  a  nonresident  foreigner, 

said  interest  is  exempt  from  the  income  tax  imposed  on  such  interest  by  the  United  States  Government  under  the  law  enacted 
October  3,  1913,  and  that  no  citizen  of  the  United  States,  wherever  residing,  or  foreigner  residing  in  the  United  States,  or 


of  its  possessions,  has  any  interest  in  said  bonds,  coupons,  or  interest;  and  I  (we)  do  hereby  promise  and  pledge 

to  forward  the  above-described  certificate  executed  by  the  owners  as  stated  and  dated  ..............................  „:  .........  ,  191..., 

to  the  Commissioner  of  Internal  Revenue,  at  Washington,  D.  C.,  not  later  than  the  20th  day  of  next  month,  in  accordance  with 
Treasury  Regulations. 

Signature  of  collecting  agent  ..........  .  .............................................................. 


Date,.... 


Address, 


FORM  OF  CERTIFICATE  TO  BE  FILED  BT  PERSONS,  FIRMS,  OR  ORGANIZATIONS  REQUIRED  TO 
WITHHOLD  AND  PAY  SAID  TAX  OTHER  THAN  THE  DEBTOR  AT  THE  SOURCE. 


To _ i  Collector  of  Internal  Revenue, 

(N.iue  of  collector  of  internal  refenue.) 


((Jivevddren  and  designate  district.) 

I  _t  _ of  the 

'(KameO ""      (bfncia"ftitie,"if  au"yV)~ 


(Person,  flrm,  or  organisation.)  (Capacity  In  whith  acting.  ) 

of  ....................................................  _______  .........................  ,  do  solemnly  declare  that  I  (we)  received 

e*.) 

-  .......  $  ...............  -  ......  ,  same  being  Income  derived 


,  belonging  to 

(Give  name  of  penon  to  whom  income 

and  that.  the  tax  thereon,  amounting  to  9- 


(Addre..) 

to  which  said  person.  Is  subject,  has  been  withheld  at  the  source  of  said  Income  by 


(Name  of  penon  withholding.) 


Date, ,  191 


(Signed) 

Address  .. 


FORM  FOE  CLAIMING  EXEMPTION  AT  THE  SOURCE  AS   PROVIDED  IN  PARAGRAPH  C,  SECTION  2,  OF 
THE  FEDERAL  INCOME-TAX  LAW  OF  OCTOBER  3,  1913. 


e  of  withholding  agent.) 


I;hereby  serve  you  with  notice  that  I 


single— married  and  living  with  my  wife— husband,  and  now  claim  the  benefit  of  the  exemption 

of  f ....,  as  allowed  In  paragraphs  C  and  D  of  section  2  of  the  Federal  Income-tax 

l»w  of  October  3, 1913  (my  total  exemption  under  said  paragraphs  being  *.... ). 


Signed: 


Date:. „ ,  191 


FORM  OF  CERTIFICATE  TO  BE  FILED  WITH  WITHHOLDING  AGENTS  BY  PARTNERSHIPS 
CLAIMING  DEDUCTIONS. 


I, „ ,  a  member  of  the  firm  or  partnership  of 

of conducting  the  business  of ,  and  residing 

(Give  character  of  business  conducted  by  partnership.) 

at , _ ,  do  solemnly  declare  that  the  said 'partnership  is  the  owner  of 

(Give  full  address.) 

$ bonds  of  the  denomination  of  f ., each,  Nos —  of  the  

(Give  name  of  debtor.) 

known  as bonds,  from  Which  were  detached  the 

(Describe  tho  particular  issue  of  bonds.), 

accompanying  interest  coupons  due ,  19»    ,  amounting  to  $ — ,  or  upon  -which  there  matured 


,  191    ,  $ of  registered  interest,  or  is  the  owner  of 

i-hich  there  accrued —,  191    ,  $_ of  income. 


(Property  or  inr. 


We  hereby  claim  a  deduction  of  $ allowed  on  account  of  the  actual  expenses  incurred  in  conducting  said  busi- 
ness, under  regulations  made  in  pursuance  of  section  2,  act  of  October  3,  1913,  and  do  solemnly  declare  that  neither  the  part- 
nership nor  its  individual  members  has  claimed  deductions  in  excess  of  its  total  actual  legitimate  annual  expenses  of  conducting 
the  business  of  said  partnership,  and  that  no  portion  of  the  living  or  personal  expenses  of  the  partners  is  included  in  the 
deductions  claimed. 


Date, 


....  191 


i  of  signing  partner: 

For. 

sis  Addr 


(Name  of  partnership.) 


67 


Form       FORM  OF  CERTIFICATE  TO  BE  ATTACHED  TO  INTEREST  COUPONS  IN  CASES  WHERE  THE  COLLECTING 
lOlla  AGENT'S  CERTIFICATE  IS  SUBSTITUTED  FOR  THE  CERTIFICATE  OF  THE  OWNERS. 

(When  owners^re  firms  or  copartnerships  in  Ihe  Uniled  States  claiming  deduction  for  lai  on  account  of  operating  eipensos  incurred.) 
(The  owner's  certificate,  of  which  the  following  certificate  la  the  counterpart,  and  bears  the  same  number  as  this  certificate,  will  be  sent  by  the  collecting 
lit  direct  to  the  Commissioner  of  Internal  Revenue,  at  Washington,  as  prescribed  by  regulations.) 

NO 

I  (we)  -.. - — do  s'olemnly  declare  that  the  owner  of  $ 

1 1          bonds  of  the - - from  which  were  detached  the  accompanying  interest  coupons 

in  7    I   due....  ,191    ,  amounting  to  I has  filed  with  me  (us)  a  duly  executed  certificate  filled  up 

I  *  «i  (Maturity.) 

!  S  i       in  accordance  with  Treasury  Regulations  of  November  28,  1913,  Form  No.  1011,  which  certificate  has  been  indorsed  by  me  (us) 
as  follows:  "Owner's  certificate  No , _, ...,191    ," 

(Name  of  collecting  agency.)  (Date.) 

and  the  partnership  did  in  said  certificate  claim  a  deduction  of  $ allowed  on  account  of  the  actual  expenses  incurred 

(f  r.  5       in  conducting  said  business,  under  regulations  made  in  pursuanceof  eection  2,  act  of  Octobers,  1913,  and  did  solemnly  declare  that 
•  S       neither  the  partnership  nor  its  individual  members  has  claimed  deductions  in  excess  of  its  total  actual  legitimate  annual  expenses 
!  3       of  conducting  the  business  of  said  partnership,  and  that  no  portion  of  the  living  or  personal  ex]>enses  of  the  partners  is  included  in 
the- deductions  claimed;  and  I  (we)  do  hereby  promise  and  pledge  {jJur»elves/   to  'orwarc'  tne  above-described  certificate 

executed  by  the  owners  as  stated  and  dated _,  191     ,  to  the  Commissioner  of  Internal  Revenue,  at  Washington, 

D.  C.,  not  later  than  the  20th  day  of  next  month,  in  accordance  with  Treasury  Regulations. 

Signature  of  collecting  agent, -. 

Dtte, ,  191  Address, 

Form       FORM  OF  CERTIFICATE  TO  BE  ATTACHED  TO  INTEREST  COUPONS  IN  CASES  WHERE  THE  COLLECTING 
1014*.  AGENT'S  CERTIFICATE  IS  SUBSTITUTED  FOR  THE  CERTIFICATE  OF  THE  OWNERS. 

(Wnon  owners  are  arms  or  copartnerships  of  foreign  countries  and  claim  Immunity  from  Income  tax.) 

(The  owner's  certificate,  of  which  the  following  certificate  is  the  counterpart,  and  bears  the  same  number  as  this  certificate,  will  be  sent  by  the 
tettn*  agent  direct  to  the  Commissioner  of  Internal  Revenue,  at  Washington,  as  prescribed  by  regulations.) 

!J  No 

I  (we) „ ,  do  solemnly  declare  that  the  owner  of  $ bonds  of 

(Name  of  collecting  agent.) 

the _ ,  from  which  were  detached  the  accompanying  interest  coupons 

•  (Name  of  dsbtor  organiwtion  ) 

:  el       due ,  191    ,  amounting  to  $ ,  has  fHed  with  me  (us)  a  duly  executed  certificate  filled  up 

in  accordance  with  Treasury  Regulations  of  November  28,  1913,  Form  No.  1014,  which  certificate  has  been  indorsed  by  me  (us) 
-0  ,,  ..       as  follows:  "Owner's  certificate  No ,  ,  ,191    ," 

(Name  of  collecting  agency.)  (Date.) 

|  ^  g  and  that  said  certificates  declare  that  said  owners  are  a  copartnership  and  that  all  the  members  of  the  firm  or  partnership,  except 
'  B  5  partners  whose  names  are  recorded  thereon,  are  nonresident  foreigners  and  as  such  are  exempt  from  the  income  tax  imposed  on 
such  income  by  the  United  States  Government  under  the  law  enacted  October  3,  1913,  and  that  no  citizen  of  the  United  States, 
wherever  residing,  or  foreigner  residing  in  the  United  States  or  any  of  its  possessions,  except  those  named  al>ove,  has  any  interest 
in  said  bonds,  coupons,  or  interest;  and  I  (we)  do  hereby  promise  and  P'edg6  {  "ujle'lves  }  *°  f°rward  the  above-described  certifi- 
cate executed  by  the  owners  as  stated  and  dated ,  191  ,  to  the  Commissioner  of  Internal  Revenue,  at 

Washington,  D.  C.,  not  later  than  the  20th  day  of  next  month,  in  accordance  with  Treasury  Regulations. 

Signature  of  collecting  agent: 

Date, ,  191  '     Address: _ 

Form  FORM  OF  CERTIFICATE  TO  BE  FILED  WITH  DEBTOR  OR  WITHHOLDING  AGENTS  BY  FIDUCIARIES. 

1015. 

(The  following  form  of  certificate  should  be  filed  with  the  debtor,  or  Ms  paying  agents,  at  the  time  of  Ihe  payment  to  the  fiduciary,  or  his  representative, 
of  all  coupons.  Interest  orders,  rents,  and  all  other  kinds  of  Income  whatsoever  upon  which  Ihe  tax  or  Income  is  required  to  be  withheld  at  the  source.) 

I  (we)  do  solemnly  declare  that  I  (we), 

am  (are)  the  duly  authorized .'...  for  the  beneficiaries  of  the  estate  or  trust  of 

(Indicate  In  what  capacity  acting.) 

,  which  estate  or  trust  is  entitled  to  the  income  from  $ 

g  K  (Describe  the  Mtate  or  trout. ) 

bonds  of  the  denominations  of  f each,  Nos. 

In 

SM  I       of  the ,  kr 

i  <J       » 1 _ bonds,  from  which  were  detached 

(Describe  the  particular  i«ue  of  bondi.) 

the  accompanying  coupons,  due ,  191    ,  amounting  to  $ ,  or  upon  which  there  has 

matured „ ,  191    ,  $ of  registered  interest,  or  which  estate  or  trust  is  entitled  to  other 

!  3       income  from  property  or  investments  upon  which  there  accrued ,  191    ,  $ of  income. 

Acting  for  and  in  the  capacity  as  stated  herein,  I  (we)  hereby  assume  the  duty  and  responsibility,  imposed  upon  withhold- 
ing agents  under  the  law,  of  withholding  and  paying  the  income  tax  due,  for  which  1  (we)  may  be  liable,  and  acting  in  said 
fiduciary  capacity  as  stated  herein,  I  (we)  do  hereby  claim  exemption  from  having  the  normal  tax  withheld  from  said  income. 

I.     Date, ,  191  Address,... 

Form  FORM  QF  CERTIFICATE  TO  BE  ATTACHED  TO  INTEREST  COUPONS  IN  CASES  WHERE  THE  COLLECTING 

AGENT'S  CERTIFICATE  IS  SUBSTITUTED  FOR  THE  CERTIFICATE  OF  THE  OWNERS. 

(Wnen  owners  are  fiduciaries.) 

(The  owner's  certificate,  of  which  the  following  certificate  Is  Ihe  counterpart,  and  bean  the  nine  number  as  this  certificate,  win  be  sent  by  the 
collecting  agent  direct  lo  the  Commissioner  of  Internal  Revenue,  at  Washington,  as  prescribed  by  regulations.) 

M 

£         No _.. 

H  W  I  (we)  ....  _,  do  solemnly  declare  that  the  owner  of  f _  bonds  of 

fc  £  (Name  of  collecting  agent.) 

S  ®  2      the „          ..  from  which  were  detached  the  accompanying  interest  coupons  due .-. — — , 

g  g  A  (Name  of  deotor  organization.)  (Maturity.) 

S  7  ^       191    ,  amounting  to  $  ,  has  filed  with  me  (us)  a  duly  executed  certificate  filled  up  in  accordance  with  Treasury 

^  •  5      Regulations  of  November  28,  1913,  Form  No.  1015,  which  certificate  has  been  indorsed  by  me  (us)  as  follows:  "Owner's  certifi- 

§  fc  h*      cate  No , 1 — ,  I9l   ,"  that  said  certificate  is 

I*  P  |  executed  bya  fiduciary,  and  that  the'fiduciary,  acti'ng'for  and  in  the  capacity  as  stated  therein,  has  assumed  the  duty  and  reepon- 

«  g  o  sibility  imposed  \ipon  withholding  agents  under  the  law.  of  withholding  and  paying  the  income  tax  due,  for  which  he  (it)  may 

B  *  j  be  liable,  and  that  acting  in  said  fiduciary  capacity  as  stated  therein,  he  ( it)  did  claim  exemption  from  having  the  normal  tax  with- 

•<  3  a  held  from  said  income;  and  I  (we)  do  hereby  promise  and  pledge  myself  (ourselves)  to  forward  the  above-described  certificate 

g  5          executed  by  the  owners  as  stated  and  dated ,  I9l    ,  to  the  Commissioner  of  Internal  Revenue,  at 

H  w          Washington,  D.  C.,  not  later  than  the  20th  day  of  next  month,  in  accordance  with  Treasury  Regulations. 

£  R  Signature  of  collecting  agent, 

7      Date, „ i.,  I9l  Address,  ~,~. 


I, 


U 

C. 


111 

PKS 

& 

°\ 


Form 
lOlGo. 


j| 

r"  S 


S3*. 


CERTIFICATE  TO  BE  FURNISHED  BY  FOREIGN  ORGANIZATIONS   NOT  SUBJECT  TO  TAX   ON  INTEREST  OR 
OTHER  INCOME  AT  SOURCE. 

1,    _  ....,  the . of  the , 

(Give  name.)  (Give  official  ponition.)  (Name  of  organization.) 

a  of ,  located  at  ,  do 

(Character  of  organization.)                                             (Country.)  (Po«t-offlce  address.) 

solemnly  declare  that  said is  a  foreign  organization,  not  engaged  in  busir 

(Give  i 

in  the  United  States,  and  is  the  owner  of  $ — 


(61"..  mm.  ol  d 


$ of  registered  interest,  or  is  the  owner  of 


bonds,  from  which  were  detached  the  accompanying  coupons, 

due 191..,  amounting  to  $ ,  or  upon  which  there  matured — .,  191.., 

upon  which  there 

accrued  .,  191..,  $ of  income,  and  that  under  the  provisions  of  the  income-tax  law  of 

October  3,  1913,  said  organization  being  a  foreign  organization,  said  interest  or  income  ia  exempt  from  the  payment  of  taxes 
collectible  at  the  source,  which  exemption  is  hereby  claimed. 

Date  -  —• m-  Name -TriK=.-sa=5— 

Arlrlrroa  Of 

,'K;roBSo "  7»«""" 


FORM  OF  CERTIFICATE  TO  BE  ATTACHED  TO  INTEREST  COUPONS  IN  CASES  WHERE  THE  COLLECTING 
AGENT'S  CERTIFICATE  IS  SUBSTITUTED  FOR  THE  CERTIFICATE  OF  THE  OWNERS. 

(Owners  Ix-lng  foreign  organization,  not  subject  to  the  Income  tar,  at  the  source.) 

(The  < 


No 

I  (»'e) _ .do  solemnly  declare  that  the  owner  of  $ .....  bonds  of 

(Name  of  collecting  agent.) 

the  .....  ,  from  which  were  detached  the  accompanying  interest  coupons 

due ,  191     ,  amounting  to  $ .,  has  filed  with  me  (us)  a  duly  executed  certificate 

filled  up  in  accordance  with  Treasury  Regulations  of  November  28,  1913,  Form  No.  1016,  which  certificate  has  been  indorsed  by 
me  (us)  as  follows:  "Owner's  certificate  No , ..., „..,  191  ," 

(Name  of  collecting  agency.)  (Date.) 

and  that  under  the  provisions  of  the  income-tax  law  of  October  3,  1913,  the  said  organization  in  said  certificate  declares  that 
it  is  a  foreign  organization,  and  that  the  said  interest  or  income  is  exempt  from  the  payment  of  taxes  collectible  at  the  source, 
which  exemption  it  claims,  and  I  (we)  do  hereby  promise  and 'pledge  { {JtJrwYves  }  to  forward  the  above-described  certificate 

executed  by  the  owners  as  stated  and  dated ,...,  191    ,  to  the  Commissioner  of  Internal  Revenue,  at 

Washington,  D.  C.,  not  later  than  the  201  h  day  of  next  month,  in  accordance  with  Treasury  Regulations. 


Signature  of  collecting  agent,  — 

Date ,  191  Address,  .... 


Form 
1018. 


CERTIFICATE  TO  BE  FURMSHED  BY  FOREIGN  ORGANIZATIONS  ENGAGED  IN  BUSINESS  IN 
THE  UNITED  STATES. 


TRKASVHY  DKPA15TMKNT, 
INTERNAL  REVENUE-INCOM  E  TAX 

2—  7:}-ll  fvl.  60,000—  F.  C.,  I'"*-.-  Kl-13. 

(Character  of  orpaoi7tit!on.)                                                (Country.) 

solemnly  declare  that  said 

(Post-office  addn*a.) 

(Give  name  of  organization.) 

the  United  States,  and  is  the  owner  of  $  bonds  of  the  denomination  of  $  each,  Nos  

of  the 

(Give  name  of  del 

bon 

0,.) 

tie,  from  which  were  detached  the  accompanying  coupons, 
upon  which  there  matured  ,  191.., 

(Describe  particular  issue  of  bonds.) 

was  accrued  ,  191..,  $  of  i 

(Property  or  investment*.) 

ncome. 

a  is  subject  to  the  normal  tax  of  1  per  centum  p«r  annum  upon  the  amount 
>tes,  for  which  tax  'it  will  make  its  return  in  due  conrw,  bnt  It  hereby  claim. 

Coder  the  prorisions  of  the  Income-tax  law  of  October  3.  1913,  the  said  organizatlo 
of  net  income  accruing  from  business  transacted  and  capital  invested  vrithln  the  United  3t 
exemption  from  having  the  said  normal  tax  of  1  per  centum  of  said  income  withheld  at  th 

Date                                                        ,  191              Name 

Address                                                                                            Of 

(OfflcWpodtion.) 

(Post  office.) 

(Name  of  organization.) 

Form 
1018a. 


Hi 


FORM  OF  CERTIFICATE  TO  BE  ATTACHED  TO  INTEREST  COUPONS  IN  CASES  WHERE  THE  COLLECTING 
AGENT'S  CERTIFICATE  IS  SUBSTITUTED  FOR  THE  CERTIFICATE  OF  THE  OWNERS. 

(Owners  t>elng  foreign  organizations  engaged  In  ^business  In  the  United  states  and  subject  to  tax.) 

collecting  agent  direct  loThe'Commi'ssione'r  o'f  InternaT'ke'venue.  at  WaTbLVo^as  "prescribed  by  rteulatio™.  '  " 

No. .... 


I  (we) do  solemnly  declare  that  the  owner  of  $ bonds  of 

(Name  of  collecting  agent.) 

the ,  from  which  were  detached  the  accompanying  interest  coupons 


due , ,  191    ,  amounting  to  5 ,  has  filed  with  me  (us)  a  duly  executed  certificate 

(Maturity.) 

filled  up  in  accordance  with  Treasury  Regulations  of  December  5,  1913,  Form  No.  1018,  which  certificate  has  been  indorsed  by 
me  (us)  as  follows:  "Owner's  certificate  No ,  , ,  191  ," 

(Name  of  collecting  agency.)  (Date.) 

and  that  under  the  regulations  made  in  pursuance  of  section  2,  act  of  October  3,  1913,  said  organization  is  subject  to  the  normal 
tax  of.  1  per  centum  per  annum  upon  the  amount  of  net  income  accruing  from  business  transacted  and  capital  invested  within  the 
United  States,  and  did  therein  claim  exemption  from  having  the  said  tax  withheld  at  the  source  from  said  income,  and  I  (we) 
do  hereby  promise  and  pledge  |  J^elves}  to  'orward  tne  above-described  certificate,  executed  by  the  owners  as  stated,  and  dated 

_ 191     ,  to  the  Commissioner  of  Internal  Revenue  at  Washington,  D.  C.,  not  later  than  the  20tb 

day  of  next  month,  in  accordance  with  Treasury  Regulations. 

Signature  of  collecting  agent, 

Date,  ....  ,  191  Address,  .... 


Konn  of  Certificate  to  be  Filed  with  Debtor  or  Withholding  Agents  by  Fiduciaries  when  Not  Claiming  Any  Exemption,  as 
an  Alternative  to  the  Filing  of  Form  No.  1015  in  Which  Exemption  is  Claimed. 

(The  foDowIn*  form  of  certificate  may  be  filed  with  the  debtor,  or  It.  paying  af  enU.  at  the  time  of  the  payment  to  the  (IdoHary.  or  hi*  rapreacnlMfre 
of  all  coupons.  Interest  orders,  renta.  and  all  other  kind*  of  laconic  whatsoever  upon  which  the  tax  on  income  l»  required  to  be  withheld  at  the  Morce  u  an 

I  (we)  do  solemnly  declare  that  I  (we), 


am  (are)  the  duly  authorized 


(Indicate  In  what  capacity  acting.) 

_  ........................  ,  which  estate  or  trust  is  entitled  to  the  income  from  f  _____  ........  _____ 

bonds  of  the  denominations  of  $  ____________________  each,  New  .........  _ 


,.„„.„_.„„.„„. ,  known  as 

,, - - bonds,  from  which  were  detached 

the  accompanying  coupons,  due ,  191...,  amounting  to  $ ,  or  upon  which  there  has 

matured ,  191...,  $ of  registered  interest,  or  which  estate  or  trnst  ia  entitled  to  other 

income  from  property  or  investments  upon  which  there  accrued ,  191. _.,  { of  income. 

Acting  for  and  in  the  capacity  herein  stated,  I  hereby  declare  that  I  (we)  do  not  now  claim  any  exemption  from  having 
the  normal  tax  of  1  per  cent  withheld  from  eaid  income  by  the  debtor  at  the  source. 


Address,  


(Capacity  ID  wbich  acting.) 


Form  lOOS-aVLlBO.OOO-r.  0.,  NOT  S-l: 


UNITED  STATES  INTERNAL  REVENUE 


FORM  OF  RETURN  FOR  MAKING  APPLICATION  FOR  DEDUCTIONS, 


To 


I  hereby  solemnly  declare  that  the  following  is  a  true  and  correct  return  of  my  gains,  jjrofits,  and 
income  from  all  oth«f  sources  for  the  calendar  year  ended  December  31,  191  (for  the  year  1913  the  period 
to  be  covered  is  only  for  ten  months,  from  March  1  to  December  31),  and  a  true  and  correct  return  of 
deductions  asked  for  under  paragraph  B  of  section  2  of  the  act  of  October  3,  1913,  and  I  hereby  claim 
deductions  as  shown  below. 


Amount  of  gains,  profits,  interest,  rents,  royalties,  profits  from  copartnerships,  and 

income 

from  all 

,other  sc 

urces 

$ 

DEDUCTIONS 

1  The  amount  of  necessary  expenses  actually  paid  in  carryinf  on  business,  except 
business  expenses  of  partnerships,  and  not  including  personal,  living,  or 
family  expenses  

$  

2.  All  interest  paid  within  the  year  on  personal  indebtedness  of  taxpayer 

3.  All  national,  State,  county,  school,  and  municipal  taxes  paid  within  the  year 
(not  including  those  assessed  against  local  benefits)  

4.  Losses  actually  sustained  during  the  year  incurred  in  trade  or  arising  from  fires, 

5.  Debts  due  which  nave  been  actually  ascertained  io  be  worthless  and  charged 
off  within  the  yeai 

6.  Amount  representing  a  reasonable  allowance  for  the  exhaustion,  wear,  and  tear 
of  property  arising  out  of  its  use  or  employment  in  the  business,  not  to  exceed 
in  the  case  of  mines  5  per  cent  of  the  gross  value  of  the  output  for  the  year  for 
which  the  computation  is  made,  but  not  including  the  expense  of  restoring 
property  or  making  good  the  exhaustion  thereof,  for  which  an  allowance  is  or 

7.  The  amount  received  as  dividends  upon  the  stock  or  from  the  net  earnings  of 
any  corporation,  joint-stock  company,  association,  or  insurance  company 
which  is  taxable  upon  its  net  income  

8.  The  amount  of  income,  the  tax  upon  which  has  been  paid  or  withheld  for  pay- 

Total  deductions    

$ 

Date: 


(Signed) 
Address  . 


NOTE.— Honey  or  other  things  of  value,  disposed  of  by  gift,  donation,  or  endowment,  shall  not  be  deducted  or  be  made  the  basis. 
far  •  deduction  from  the  income  of  persons  or  corporations  in  their  tax  returns  tinder  the  income-tax  law.  c  S-TOT 


70 


II  If  FUifJHI  If  CClilCTQg. 


INCOME  TAX. 


TO  IE  Fttiu  ii  it  nrcnuL  KIHK  KIIUB. 
/"//*  /to.  — 


THE   RENAL.TV 

FOR  FAILURE  TO  HAVE  THIS  RETURN  IN 
THE  HANDS   OF  THE  COLLECTOR  OF 

INTERNAL    REVENUE    ON   OR   KFORC      Pogt 

MARCH   I  IS   S20   JO    $1,000. 

-        (•««  IMCTHUCTION*  OH.  PAO«  4.) 

UNITED  STATES  INTERNAL  REVENUE 


i;  * 
£ftf  _- 


Ling 


RETURN  OF  ANNUAL  NET  INCOME  OF  INDIVIDUALS. 

(A.  prOTldod  by  Act  of  CoDgWM.  .pproyrf  October  3.  W13.) 


RETURN  OF  NET  INCOME  RECEIVED  OR  ACCRUED  DURING  THE  YEAR  ENDED  DECEMBER  31,  191. 

(FOR  THE' YEAR  I»I3.  FROM  MARCH  I.  TO  DECEMBER  SI  J  - 

Filed  by  (or  for) 1 of , 

(Full  .mm.  of  (QdKldul.)  (BUM  .(Hi  Xo  ) 

it  Hie  City,  Town,  or  Post  Office  of ,.....•.....:. "State  of 

(fill  In  pag«.  1  .nd  3  b«toi»  ouAlng  entrlt.  b.low.) 

1.  GBoes  INCOME  (see  page  2,  line  12) -^ $. 

2.  GENERAL  DEDUCTIONS  (see  page  3,  line  7) - _$_. 

t 

Deductions  and  exemptions  allowed  in  computing  income  subject  to  the  normal  tax  of  I  per  cent. 

4.  Dirtdenda  and  net  earnings  received  or  accrued,  of  corpora- 
tions, etc.,  subject  to  like  tax.     (See  page  2,  line  11) t- 

6.  Amount  of  income  on  which  the  normal  tax  has  been  deducted 

and  withheld  at  the  source.    (See  page  2,  line  9,  column  A.) 

6  Specific  exemption  of  $3,000  or  $4,000,  as  the  case  may  be. 

(See  Instructions  3  and  19) 

Total  deductions  and  exemptions.     (Ttems  4,  5,  and  6) .1  ». 

T.  TAXABLB  iMOOHBon  which  the  norinai  tax  of  1  per  cent  ia  to  be  calculated.    (See  Instruction  3).  _$. 
«.  When  the  net  Income  shown  above  on  line  3  exceeds  $20,000,  the  additional  tax  thereon  must  be  calculated  as  per  schedule  belowi 

IHOOME.  TAX. 

1  per  cent  on  amount  over  $20,000  and  not  exceeding  $50,000 $ _ f. 

2  "  "  50,000        "  "           75,000. 

3  "  "  75,000        "  "         100,000. 

4  "  "  100,000        "  '•-        250,000. 

5  "  "  250,000 
C  *  ••  600,000. 

Total  additional  or  super  tax $. 

Total  normal  tax  (1  per  cent  of  amount  entered  on  line  7) $ .. . 

Total  tax  liability $. 


71 


This  statement  must  show 
from  all  sources  during  the  year  specified  on  page  1. 


GROSS    INCOME. 

the. proper  tpaces  the -entire  amount  of  gains,  profits,  and  income  received  ly  or  accrued  to  the  indi, 


DESCRIPTION  OF  INCOME. 

A. 

Amount  of  income  on  wlikli  lax  bun  t*<:u 
dedocted  and  withheld  at  tbe  Kmrve. 

Amoiuit  of  income  on  which  tax  hai  nor 
benuiedacted  >nd  withheld  at  thc~soorv«. 

1.  Total  amount  derivedfrom  salaries,  wages,  or  compensation  for 
personal  service  of  whatever  kind  and  in  whatever  form  paid- 

2.  Total  amount  derived  from  professions,  vocations,  businesses, 
trade,  commeroe,or  sales  or  dealings  m  property,  whether  real 
or  personal,  growing  out  of  the  ownership  or  use  of  or  interest 

$  

| 

3.  Total  amount  derived  from  rents  and  from  interest  on  notes, 
mortgages,  and  securities  (other  than  reported  on  lines  5 

4.  Total  amount  of  gains  and  profits  derived  from  partnership 
business,  w  hether  the  same  be  divided  and  distributed  or  not. 

6.  Total  amount  of  fixed  and  determinate  annual  gains,  profits,, 
and  income  derived  from  interest  npon  bonds  and  mort- 
gages or  deeds  of  trust,   or  other  similar  obligations  of 
corporations,   joint-stock   companies   or   associations,   and 
insurance  companies,  whether  payable  annually  or  at  shorter 

_.._»  

6.  Total  amount  of  income  derived  from  coupons,  checks,  or  bills 
of  exchange  for  or  in  payment  of  interest  upon  bonds  issued 
in  foreign  countries  and  lipon  foreign  mortg<i/jes  or  like  obliga- 
tions (not  payable  in  the  United  States),  and  also  from  cou- 
pons, checks,'  or  bills  of  exchange  for  or  in  payment  of  any 
dividends  upon  the  stock  or  interest  upon  the  obligations  of 
foreign  corporations,  associations,  and  insurance  companies 

8.  Total  amount  of  income  derived  from  any  source  whatever, 
irot  specified  or  entered  elsewhere  on  this  page.  

9.                                            TOTALS.,  

$  

$.  

NOTE.-Enl.-r  total  of  Column  A  on  line  5  of  first  p.go. 

10.                                             AGGREGATE  TOTALS  OF  COLUMNS  A  AND  B  -  

$  

11.  Total  amount  of  income  derived  from  dividends  on  the  stock  or  from  the  net  earnings  of  corpo- 
rations, joint-stock  companies,  associations,  or  insurance  companies  subject  t6  like  tax  

$  

(To  be  enter.-.!  on  line  i  of  first  page.) 

1-.  TOTAL  "Gross  Income"  (to  be  entered  on  line  1  of  first  page)  

1 

72 


GENERAL.    DEDUCTIONS. 

1.  The  amount  of  necessary  expenses  actually  paid  in  carrying  on  business,  but  not  including 

business  expenses  of  partnership?,  and  not  including  personal,  living,  or  family  expenses $- 

2.  All  interest  paid  within  the  year  on  personal  indebtedness  of  taxpayer... 

3.  All  national,  State,  county,  school,  and  municipal  taxes  paid  within  the  year  (not  including  thow 

assessed  against  local  benefits) 

4.  Losses  actually  sustained  during  the'  year  incurred  in  trade  or  arising  from  firee,  storms,  or 

shipwreck,  and  not  eonipeneated  for  by  insurance  or  otherwise . .. 

8.  Debts  duo  which  have  been  actually  ascertained  to  be  worthless  and  which  have  been  charged 

off  within  the  year 

9.  Amount  representing  a  reasonable  allowance  for  the  exhaustion,  wear,  and  tear  of  property 

arising  out  of  its  use  or  employment  in  the  business,  not  to  exceed,  in  the  case  of  mines, 
5  per  cent  of  the  gross  value  at  the  mine  of  the  output  for  the  year  for  which  the  computation 
is  made,  but  no  deduction  shall  be  made  for  any  amount  of  expense  of  restoring  property 
or  making  good  the  exhaustion  thereof,  for  which  an  allowance  is  or  has  been  made .' 

7.  Total  "GENEBAL  DEDUCTIONS"  (to  be  entered  on  line  2  of  first  page)  ... 

AFFIDAVIT  TO  BE  EXECUTED  BY  INDIVIDUAL  MAKING  HIS  OWN  RETURN. 

I  solemnly  swear  (or  affirm)  that  the  foregoing  return,  to  the  best  of  my  knowledge  and  belief,  contains  a  true  and  complete 
statement  of  all  gains,  profits,  and  income  received  by  or  accrued  to  me  during  the  year  for  which  the  return  is  made,  and  that  I  am 
entitled  to  all  the  deductions  and  exemptions  entered  or  claimed  therein,  under  the  Federal  Income-tax  Law  of  October  3,  1913. 

Sworn  to  and  subscribed  before  me  this .^.. 

day  of ,  191 

AFFIDAVIT  TO  BE  EXECUTED  BY  DULY  AUTHORIZED  AGENT  MAKING  RETURN  FOR  INDIVIDUAL, 

I  solemnly,  swear  (or  affirm)  that  I  have  sufficient  knowledge  of  the  affairs  and  property  of 

'to  enable  me  to  make  a  full  and  complete  return  thereof,  and  that  the  foregoing  return,  to  the  best  of  my  knowledge  and  belief,  contains 
a  true  and  complete  statement  of  all  gains,  profits,  and  income  received  by  or  accrued  to  said  individual  during  the  year  for  which  .the 
return  is  made,  and  that  the  said  individual  is  entitled,  under  the  Federal  Income-tax  Law  of  October  3,  1913,  to  all  the  deductions 
and  exemptions  entered  or  claimed  therein. 

Sworn  to  and  subscribed  before  me  this „ J _ . 

day  of ;..,  191 

ADDRESS 

IN    FULL. 

(Official" c«p*cit7.)  k"" 

'2-7387  [SEE  INSTRUCTIONS  ON  BACK  OF  THIS  PAGE.) 


73 


INSTRUCTIONS  FOR  1040 
Annual  Return  by  Individuals  (1040) 

1.  This    return    shall   be    made   by   every   citizen    of    the   United    States, 
whether   residing  at  home   or  abroad,   and  by  every  person  residing  in  the 
United  States,  though  not  a  citizen  thereof,  having  a  net  income  of  $3,000 
or  over  for  the  taxable  year,  and  also  by  every  nonresident  alien  deriving  in- 
come from  property  owned  and  business,  trade,  or  profession  carried  on  in 
the  United  States  by  him. 

2.  When  an  individual  by  reason  of  minority,  sickness  or  other  disability, 
or  absence  from  the  United  States,  is  unable  to  make  his  own  return,  it  may 
be  made  for  him  by  his  duly  authorised  representative. 

3.  The  normal  tax  of  1  per  cent  shall  be  assessed  on  the  total  net  income 
less  the  specific  exemption  of  $3,000  or  $4,000  as  the  case  may  be.     (For  the 
year  1913,  the  specific  exemption  allowable  is  $2,500  or  $3,333.33,  as  the  case 
may  be.)     If,  however,  the  normal  tax  has  been  deducted  and  withheld  on 
any  part  of  the  income  at  the  source,  or  if  any  part  of  the  income  is  re- 
ceived as  dividends  upon  the  stock  or  from  the  net  earnings  of  any  corpora- 
tion, etc.,  which  is  taxable  upon  its  net  income,  such  income  shall  be  deducted 
from  the  individual's  total  net  income   for  the   purpose  of   calculating  the 
amount  of  income  on  which  the  individual  is  liable  for  the  normal  tax  of  1 
per  cent  by  virtue  of  this  return.     (See  page  1,  line  7.) 

4.  The  additional  or  super  tax  shall  be  calculated  as  stated  on  page  1. 

5.  This  return  shall  be  filed  with  the  Collector  of  Internal  Revenue  for 
the  district  in  which  the  individual  resides  if  he  has  no  other  place  of  business, 
otherwise  in  the  district  in  which  he  has  his  principal  place  of  business;  or  in 
case  the  person  resides  in  a  foreign  country,  then  with  the  collector  for  the 
district  in  which  his  principal  business  is  carried  on  in  the  United  States. 

6.  This  return  must  be  filed  on  or  before  the  first  day  of  March  succeed- 
ing the  close  of  the  calendar  year  for  which  return  is  made. 

7.  The  penalty  for  failure  to  file  the  return  within  the  lime  specified  by 
law  is  $20  to  $1,000.    In  case  of  refusal  or  neglect  to  render  the  return  within 
the  required  time  (except  in  cases  of  sickness  or  absence),  50  per  cent  shall  be 
added  to  amount  of  tax  assessed.     In  case  of  false  or  fraudulent  return,  100 
per  cent  shall  be  added  to  such  tax,  and  any  person  required  by  law  to  make, 
render,  sign,  or  verify  any  return  who  makes  any  false  or  fraudulent  return 
or  statement  with  intent  to  defeat  or  evade  the  assessment  required  by  this 
section  to  be  made  shall  be  guilty  of  a  misdemeanor,  and  shall  be  fined  not 
exceeding  $2,000  or  be  imprisoned  not  exceeding  one  year,  or  both,  at  the 
discretion  of  the  court,  with  the  costs  of  prosecution. 

8.  When  the  return  is  not  filed  within  the  required  time  by  reason  of  sick- 
ness or  absence  of  the  individual,  an  extension  of  time,  not  exceeding  30 
days  from  March  1,  within  which  to  file  such  return,  may  be  granted  by  the 
collector,  provided  an  application  therefor  is  made  by  the  individual  within 
the  period  for  which  such  extension  is  desired. 

9.  This  return  properly  filled  out  must  be  made  under  oath  or  affirmation. 
Affidavits  may  be  made  before  any  officer  authorised  by  law  to  administer 
oaths.     If  before  a  justice  of  the  peace  or  magistrate,  not  using  a  seal,  a 
certificate  of  the  clerk  of  the  court  as  to  the  authority  of  such  officer  to  ad- 
minister oaths  should  be  attached  to  the  return. 

10.  Expense    for    medical    attendance,    store    accounts,    family    supplies, 
wages  of  domestic  servants,  cost  of  board,  room,  or  house  rent  for  family 
or  personal  use,  are  not  expenses  that  can  be  deducted  from  gross  income. 
In  case  an  individual  owns  his  own  residence  he  can  not  deduct  the  esti- 
mated value  of  his  rent,  neither  shall  he  be  required  to  include  such  esti- 
mated rental  of  his  home  as  income. 

11.  The   farmer,   in   computing  the   net  income    from   his    farm    for  his 
annual   return,    shall   include   all   moneys   received   for  produce   and   animals 
sold,  and  for  the  wool  and  hides  of  animals  slaughtered,  provided  such  wool 
and  hides  are  sold,  and  he  shall  deduct  therefrom   the   sums  actually  paid 
as  purchase  money  for  the  animals  sold  or  slaughtered  during  the  year. 

74 


Instructions  for  1040  continued 

When  animals  were  raised  by  the  owner  and  are  sold  or  slaughtered  he 
shall  not  deduct  their  value  as  expenses  or  loss.  He  may  deduct  the  amount 
of  money  actually  paid  as  expense  for  producing  any  farm  products,  live 
stock,  etc.  In  deducting  expenses  for  repairs  on  farm  property  the  amount 
deducted  must  not  exceed  the  amount  actually  expended  for  such  repairs 
during  the  year  for  which  the  return  is  made.  (See  page  3,  item  6.)  The 
cost  of  replacing  tools  or  machinery  is  a  deductible  expense  to  the  extent 
that  the  cost  of  the  new  articles  does  not  exceed  the  value  of  the  old. 

12.  In   calculating   losses,    only   such   losses   as    shall   have   been   actually 
sustained   and  the  amount  of  which  has  been   definitely  ascertained   during 
the  year  covered  by  the  return  can  be  deducted. 

13.  Persons    receiving    fees    or    emoluments    for    professional    or    other 
services,  as  in  the  case  of  physicians  or  lawyers,  should  include  all  actual 
receipts  for  services  .rendered  in  the  year  for  which  return  is  made,  together 
with  all  unpaid  accounts,  charges  for  services,  or  contingent  income  due  for 
that  year,  if  good  and  collectible. 

14.  Debts   which  were   contracted  during  the  year   for  which   return   is 
made,  but  found  in  said  year  to  be  worthless,  may  be  deducted  from  gross 
income  for  said  year,  but  such  debts  can  not  be  regarded  as  worthless  until 
after   legal   proceedings  to    recover  the    same   have   proved    fruitless,   or   it 
clearly  appears  that  the  debtor  is  insolvent.     If  debts  contracted  prior  to  the 
year  for  which  return  is  made  were  included  as  income  in  return  for  year 
in    which    said    debts   were    contracted,    and    such    debts    shall    subsequently 
prove  to  be  worthless,  they  may  be  deducted  under  the  head  of  losses  in  the 
return  for  the  year  in  which  such  debts  were  charged  off  as  worthless. 

15.  Amounts  due  or  accrued  to  the  individual  members  of  a  partnership 
from   the   net   earnings   of   the   partnership,   whether   apportioned   and   dis- 
tributed or  not,  shall  be  included  in  the  annual  return  of  the  individual. 

16.  United  States  pensions  shall  be  included  as  income. 

17.  Estimated    advance   in   value   of   real   estate   is   not   required   to   be- 
reported  as  income,  unless  the  increased  value  is  taken  up  on  the  books  of 
the  individual  as  an  increase  of  assets. 

18.  Costs   of   suits   and   other   legal   proceedings   arising   from   ordinary 
business  may  be  treated  as  an  expense  of  such  business,  and  may  be  deducted 
from  gross  income  for  the  year  in  which  such  costs  were  paid. 

19.  An   unmarried   individual   or   a   married   individual   not  living  with 
wife  or  husband  shall  be  allowed  an  exemption  of  $3,000.     When  husband 
and  wife  live  together  they  shall  be  allowed  jointly  a  total  exemption  of 
only  $4,000  on  their  aggregate  income.    They  may  make  a  joint  return,  both 
subscribing  thereto,  or  if  they  have  separate  incomes,  they  may  make  sepa- 
rate returns;  but  in  no  case  shall  they  jointly  claim  more  than  $4,000  exemp- 
tion on  their  aggregate  income. 

20.  In  computing  net  income  there  shall  be  excluded  the  compensation 
of  all  officers  and  employees  of  a  State  or  any  political  subdivision  thereof,, 
except  when  such  compensation  is  paid  by  the  United  States  Government. 


75 


10  BE  RUEUM  BY  COLLECTOR. 

(List  No 

District  of 

Date  received 


Form  1041. 


INCOME  TAX. 


T8  M  RUED  «  BY  BIEfflAl  HYEIfllE  BUffJU. 

File  Ho 

Assessment  List  ~ 


THE  HANDS  or  im  COLLECTOR  or 

INTERNAL    REVENUE    ON    OR   BEFORE      Page Littt 

MARCH   I  IS   $20  TO   $1,000. 

(SEE  INSTRUCTIONS  ON  PACK  4.) 

UNITED  STATES  INTERNAL  REVENUE. 


RETURN  OF. ANNUAL  INCOME  BY  FIDUCIARIES. 

(Ai  prorldsd  by  Act  of  Congnat  approved  October  3, 1913.) 


RETURN  OF  INCOME  RECEIVED  OR  ACCRUED  DURING  THE  YEAR  ENDED  DECEMBER  31.  19!.... 

(FOR  THE  YEAR  1913.  FROM  MARCH  I,  TO  DECEMBER  31.) 


Filed  by 


.,  acting  in  the  capacity  of, 


(State  whethor  trnatee,  executor,  etc.) 


,  for  the  beneficiaries  of  the  estate  or  trust  of- 


(Fill  In  pag<M  2  and  3  before  I 


5  entriw  on  this  page.) 


1.  Gfiosa  INCOME  (ace  page  2,  11] 

2,  TOTAL  Drotjonous  (see  page 

3.  Amount  of  income  paid  or  pi 
been  deducted  and  withfif 

10  11) 

$ 

3,  line  9)  

$ 

lyabto  to  beneficiaries  on  which  the  normal  tax  of  1  per  cent;  has 
Id  as  listed  below  ^  

$ 

KamMoftHioeaciartM. 

Addreow. 

Amonnt    of    Income 

Amount  of  exemp- 
tion claimed. 

At 

nount  of  Income  on 
which  fiduciary  la 
liable  for  tax. 

"^^  held. 

*..  

$ 

j 

$  ' 

»' 

-  - 

o  8-73M                      TOTALS 

H  

$  

$  

$...  

76 


GROSS    INCOME. 


Thi;:  statement  must  show  in  the  proper  spaces  the  entire  amount  of  gains,  profits,  and  income  coming  Mo  the  custody  or  control  and 
management  of  the  fiduciary,  for  the  benefit  of  the  beneficiaries  of  the  trust  or  estate,  during  the  year  specified  on  page  1. 


DESCRIPTION  OF  INCOME. 

A. 

B. 

deducted  and  withheld  at  the  wurco. 

been  deducted  and  withheld  at  the  source. 

1.  Total  amount  derived  from  salaries,  wages,  or  compensation  for 
personal  service  of  whatever  kind  and  in  whatever  form  paid. 

2.  Total  amount  derived  from  professions,  vocations,  businesses, 
'trade,  commerce,  or  salesor  dealings  in  property,  whether  real 
or  personal,  growing  out  of  theownership  or  use  of  or  interest 

$ 

$ 



3.  Total  amount  derived  from  rents  and  from  interest  ,on  notes, 
mortgages,  and  securities  (other  than  reported  on  lines  5 

4.  Total  amount  of  gains  and  profits  derived  from  partnership 
business,  whether  the  same  be  divided  and  distributed  ornot- 

5.  Total  amount  of  fixed  and  determinable  annual  gains,  profits, 
and  income  derived  from  interest  upon  bonds  and  mort- 
gages or  deeds  of  trust,   or  other  similar  obligations  of 
corporations,    joint-stock  companies    or   associations,    and 
insurance  co.mpanies,  whether  payable  annually  or  at  shorter 

6.  Total  amount  of  income  derived  from  coupons,  checks,  or  bills 
of  exchange  for  or  in  payment  of  interest  upon  bonds  issued 
in  foreign  countriet  and  upon  foreign  mortgaget  or  like  obliga- 
tions (not  payable  in  the  United  States),  and  also  from  cou- 
pons, checks,  or  bills  of  exchange  for  or  in  payment  of  any 
dividends  upon  the  stock  or  interest  upon  the  obligations  of 
foreign  corporations,  associations,  and  insurance  companies 

7.  Total  amount  of  income  derived  from  any  source  whatever, 
not  specified  or  entered  elsewhere  on  this  page  

$  

NOTE.—  Enter  total  of  Column  A  on  line  8  of  Ih 

9.                                             AOOHEOATB  TOTALS  OF  COLUMNS  A  AMI 

10.  Total  amount  of  income  derived  from  dividends  on  the  stock  o 
rations,  joint-stock  companies,  associations,  or  insurance  com 
(To  be  entered  on  line  7  of  third  p.«e.) 

11.  AGGREGATE  TOTAL  of  "Gross  Income"  (to  be  entered  on  line  1 

c  I—  T374 

rd  'page. 

).B  

f  

from  the 
paniea  su 

of  first  p 

net  earnings  of  corpo- 
)ject  to  like  tax  

$  

$  — 

77 


DEDUCTIONS. 

1.  The  amount  of  necessary  expenses  ^tually  paid  in  carrying  on  business,  but  not  including 

business  expenses  of  partnerships,  and  not  including  personal,  living,  or  family  expenses.......  $.. 

2.  All  interest  paid  within  the  year  on  personal  indebtedness  of  taxpayer 

3.  All  United  States,  State,  county,  school,  and  municipal  taxes  paid  within  the  year  (not  including 

those  assessed  against  local  benefits) 

4.  Losses  actually  sustained  during  the  year  incurred  in  trade  or  arising  from  fires,  storms,  or 

shipwreck,  and  not  compensated  for  Dy  insurance  or  otherwise  -, - 

5.  Debts  due  which  have  beeji  actually  ascertained  to  be  worthless  and  which  have  been  charged 

off  within  the  year ... - 

6.  Amount  representing  a  reasonable  allowance  for  the  exhaustion,  wear,  and  tear  of  property 

arising  out  of  its  use  or  employment  in  the  business,  not  to  exceed,  in  the  case  of  mines, 
5  per  cent  of  the  gross  value  at  the  mine  of  the  output  for  the  year  for  which  the  computation 
is  made,  but  no  deduction- shall  be  made  for  any  amount  of  expense  of  restoring  property 
or  making  good  the  exhaustion  thereof,  for  which  an  allowance  is  or  baa  been  made 

7.  Total  amount  of  income  derived  from  dividends  on  the  stock  or  from  the  net  earnings  of  corpo- 

rations, joint-stock  companies,  associations,  or  insurance  companies  subject  to  like  tax  (same 
as  entry  on  line  10,  page  2) . 

8.  Amount  of  income  on  which  the  normal  tax  of  1  per  cent  has  been  deducted  and  withheld  at 

the  source  (see  page  2,  line  8,  column  A) 

fl.  TOTAL  DEDUCTIONS  (to  be  entered  on  line  2  of  first  page) . 

AFFIDAVIT  TO  BE  EXECUTED  WHERE  FIDUCIARY  IS  AN  INDIVIDUAL: 
I  solemnly-swear  (or  affirm)  that  I  am  the . for  the  beneficiaries  of  the  estate  or 

(State  whether  trustee,  executor,  etc.) 

trust  of _ _ -~ — ;  that  the  foregoing  return,  to  the  best  of  niy 

knowledge  and  belief,  contains  a  true  and  complete  statement  of  all  gains,  profits,  and  income  coming  into  my  custody  or  control  and 
management  during  the  year  for  which  the  return  is  made;  that  sain  beneficiaries  are  entitled,  under  the  Federal  Income-tax  Law  of 
October  3,  1913,  to  all  the  deductions  entered  or  claimed  therein;  that  all  certificates  claiming  personal  exemption,  presented  by  the 
beneficiaries,  are  herewith  inclosed;  and  there  is  contained  therein  a  true  and  complete  list  of  the  names  and  addresses  of  all  bene- 
ficiaries .to  whom  any  part  of  .the  amount  stated  oh  line  3  of  the  first  page  thereof  has  been  paid  or  is  payable. 

Sworn  to  and  subscribed  before  me  this _ - 

(Signature  of  fiduciary.) 
/ 

day  of  ..,; ,  191 

NO 

AFFIDAVIT  TO  BE  EXECUTED  WHERE  FIDUCIARY  IS  AN  ORGANIZATION. 

I  solemnly  swear  (or  affirm)  thafl  am  the  of  the 

(State  official  portion.)  (State  name  o«  fiduciary  organisation.) 

of  which  organization  is  the  duly  authorized  or  appointed — 

<  Addre.  in-luU.)  (State  whether  trurtee,  executor,  ett.) 

for  the  beneficiaries  of  the  estate  or  trust  of , ;  that  I  am 

duly  authorized  to  act  for  said  fiduciary;  that  the  foregoing  return,  to  the  best  of  my  knowledge  and  belief,  contains  a  true  and  complete 
statement  of  all  gains,  profits,  and  income  coming  into  the  custody  or  control  and  management  of  said  organization  in  its  fiduciary 
capacity  as  stated  during  the  -year  for  which  the  return  is  made;  that  sai8  beneficiaries  are  entitled  under  the  Federal  Income-tax  Law 
of  Octobers,  1913.  to  all  the  deductions  entered  or  claimed  therein;  that  all  certificates  claiming  personal  exemption,  presented  by 
the  beneficiaries,  are  herewith  inclosed?  and  there  is  contained  therein  a  true  and  complete  list  of  the  names  and  addresses  of  all 
beneficiaries  to  whom  any  part  of  the  amount  stated  on  line  3  of  the  first  page  thereof  has  been  paid  or  is  payable. 

Sworn-to  and  subscribed  before  me  this 

(Signature  of  officer  reprwenting  fiduciary.) 

day  of  ...,  m 

ADDRESS 
-1  IN  FULL 

SEAL  OF 
OFFICER 

FFIDAVIT.  ,  .  -  a_7»4 


78 


INSTRUCTIONS  FOR  1041 
Annual  Return  By  Fiduciaries  (1041) 

1.  Fiduciaries    shall,    when    the    annual    interest    of    any    beneficiary    in 
income  accruing  and  payable  through  said  fiduciary  is  in  excess  of  $3,000, 
make  and  render  a  return  on  this   form  of  such   income  of  the  person  or 
persons   for  whom   they   act,   to   the   Collector  of   Internal   Revenue   of  the 
district  in  which  the  fiduciary   resides.     The   return   shall  be  made  as  pro- 
vided herein,  whether  the  income  is  distributed  or  not.     See  Treasury  De- 
cision 1906. 

2.  The  list  return  required   from  fiduciaries  by  regulations  provided  in 
Treasury  Decision  1906,  issued  November  28,  1913,  shall  be  made  on  page  1 
of  this  return,  giving  thereon  the  name  of  each  beneficiary  of  the  trust  or 
estate,  the  amount  of  income  paid  or  accrued  to  each  beneficiary,  the  amount 
of  exemption  claimed  by  each  beneficiary,  if  any,  the  amount  of  income  on 
which  fiduciary  is  liable  for  tax,  and  the  amount  of  income  withheld  for  tax. 

3.  Where   several   individuals   act   jointly   in   a   fiduciary  capacity,   when 
this  return  is  required  it  may  be  made  and  executed  by  one  of  two  or  more. 
When  the  fiduciary  is  an   organization  it  shall  be  signed   and  executed  by 
the  President,  Secretary,  or  Treasurer  of  said  organization. 

4.  This  return  shall  be  filed  with  the  Collector  of  Internal  Revenue  for 
the  district  in  which  the  fiduciary  resides  if  he  has  no  other  place  of  busi- 
ness, otherwise  in  the  district  in  which  he  has  his  principal  place  of  business. 

5.  This  return  must  be  filed  on  or  before  the  first  day  of  March  succeed- 
ing the  close  of  the  calendar  year  for  which  return  is  made. 

6.  The  penalty  for  failure  to  file  the  return  within  the  time  specified  by 
law  is  $20  to  $1,000.     In  case  of   refusal  or  neglect  to  render  the  return 
within  the   required  time    (except  in   case  of   sickness   or  absence)    50  per 
cent  shall  be  added  to  amount  of  tax  assessed.    In  case  of  false  or  fraud- 
ulent return  100  per  cent  shall  be  added  to  such  tax  and  a  fine  not  exceed- 
ing $2,000  or  imprisonment  not  exceeding  one  year  or  both  may  be  im- 
posed. 

7.  When  the  return  is  not  filed  within  the  required  time  by  reason  of 
sickness  or  absence  of  the  fiduciary,   an   extension   of  time  not  exceeding 
30  days  from  March  1,  within  which  to  file  such  return  may  be  granted  by 
the    Collector,   provided   an    application   therefor   is    made  by  the   fiduciary 
within  the  period  for  which  such  extension  is  desired. 

8.  This  return  properly  filled  out  must  be  made  under  oath  or  affirma- 
tion.    Affidavits  may  be  made  before  any  officer  authorized  by  law  to  admin- 
ister  oaths.     If  before  a  justice   of  the  peace  or  magistrate,   not  using  a 
seal,  a  certificate  of  the  clerk  of  the  court  as  to  the  authority  of  such  officer 
to  administer  oaths  should  be  attached  to  the  return. 

The  following  instructions,  so  far  as  applicable,  are  to  be  considered 
by  the  fiduciary  in  determining  the  amount  of  income  coming  into  his 
custody  or  control  and  management  which  should  be  reported  in  this 
return  on  page  2,  and  the  deductions  which  should  be  reported  on  page  3. 

9.  Expense  for  medical  attendance,  store  accounts,  family  supplies,  wages 
of  domestic  servants,  cost  of  board,  room,  or  house  rent  for  family  or  per- 
sonal  use,  are  not  expenses  that  can  be  deducted   from  gross  income.     In 
case  an  individual  owns  his  own  residence  he  can  not  deduct  the  estimated 
value   of   his   rent,   neither   shall   he  be   required   to   include   such   estimated 
rental  of  his  home  as  income. 

10.  The  farmer,  in  computing  the  net  income  from  his  farm  for  his  an- 
nual return,  shall  include  all  moneys  received  for  produce  and  animals  sold, 
and  for  the  wool  and  hides  of  animals  slaughtered,  provided  such  wool  and 
hides  are  sold,  and  he  shall  deduct  therefrom  the  sums  actually  paid  as  pur- 
chase money  for  the  animals  sold  or  slaughtered  during  the  year. 

When  animals  are  raised  by  the  owner  and  are  sold  or  slaughtered,  he 
shall  not  deduct  their  value  as  expenses  or  loss.  He  may  deduct  the  amount 
of  money  actually  paid  as  expense  for  producing  any  farm  products,  live 
stock,  etc.  In  deducting  expenses  for  repairs  on  farm  property  the  amount 

79 


Instructions  1041  cont'd. 

deducted  must  not  exceed  the  amount  actually  expended  for  such  repairs 
during  the  year  for  which  the  return  is  made.  (See  page  3,  item  6.)  The 
cost  of  replacing  tools  or  machinery  is  a  deductible  expense  to  the  extent 
that  the  cost  of  the  new  articles  does  not  exceed  the  value  of  the  old. 

11.  In  calculating  losses,  only  such  losses  as  shall  have  been  actually  sus- 
tained and  the  amount  of  which  has  been  definitely  ascertained  during  the 
year  covered  by  the  return  can  be  deducted. 

12.  Persons  receiving  fees  or  emoluments  for  professional  or  other  serv- 
ices, as  in  the  case  of  physicians  or  lawyers,  should  include  all  actual  receipts 
for  services  rendered  in  the  year  for  which  the  return  is  made,  together  with 
all  unpaid  accounts,  charges  for  services,  or  contingent  income  due  for  that 
year,  if  good  and  collectible. 

13.  Debts  which   were  contracted   during  the  year   for  which   return  is 
made,  but  found  in  said  year  to  be  worthless,  may  be  deducted  from  gross 
income  for  said  year,  but  such  debts  can  not  be  regarded  as  worthless  until 
after  legal  proceedings  to  cover  the  same  have  proved  fruitless,  or  it  clearly 
appears  that  the  debtor  is  insolvent.     If  debts  due  to  the  taxpayer  and  con- 
tracted prior  to  the  year  for  which  return  is  made  were  included  as  income 
in  return  for  year  in  which  said  debts  were  contracted,  and  such  debts  shall 
subsequently  prove  to  be  worthless,  they  may  be  deducted  under  the  head  of 
losses  in  the  return  for  the  year  in  which  such  debts  were  charged  off  as 
worthless. 

14.  Amounts  due  or  accrued  to  the  individual  members  of  a  partnership 
from  the  net  earnings  of  the  partnership,  whether  apportioned  and  distributed 
or  not,  shall  be  included  in  the  annual  return  of  the  individual. 

15.  United  States  pensions  shall  be  included  as  income. 

16.  Estimated  advance  in  value  of  real  estate  is  not  required  to  be  re- 
ported as  income,  unless  the  increased  value  is  taken  up  on  the  books  of  the 
individual  as  an  increase  of  assets. 

17.  Costs   of   suits   and   other   legal   proceedings   arising   from   ordinary 
business  may  be  treated  as  an  expense  of  such  business,  and  may  be  de- 
ducted from  gross  income  for  the  year  in  which  such  costs  were  paid. 

18.  An   unmarried    individual    or    a    married    individual    not    living   with 
wife  or  husband  shall  be  allowed  an  exemption  of  $3,000.     When  husband 
and  wife  live  together  they   shall   be   allowed  jointly   a   total   exemption   of 
only  $4,000  on  their  aggregate  income. 

19.  In  computing  net  income  there  should  be  excluded  the  compensation 
of  all  officers  and  employees  of  a  State  or  any  political  subdivision  thereof, 
except  when  such  compensation  is  paid  by  the  Unted  States  Government. 


TO  BP  FILLER  tN  B  r  COLLECTORS:     -    -  '  TO  BE  FILLED  IN  IV  INTERNAL  REVENUE  BUREAU. 

•.LMHo                                   Cla«  THE   PKNAL.TV 

""  rOR  FAILURE  TO  HAVE  THIS  RETURN  IN  THE  HANDS  Of  THE      JugccMrf  List                                             101 

,  COLLECTOR  Of  INTERNAL  REVENUE  ON  OR  Kf  ORE  MARCH I 


•MinaM 191  ,  »>!•  • 

UNITED  STATES  INTERNAL  REVENUE/ 
RETURN  OF  ANNUAL  NET  INCOME. 

(Section  2,  Act  of  Congress  approved  October  3, 1913. ) 


INSURANCE     COMPANIES. 

RETURN  OF  NET  INCOME  Received  during  the  calendar  (fiscal)  year  ended _.. W1 

the  principal  place  of  business  of  which  is  located  at 


(Street  and  No.) 

City  or  Town  of ... in  the  State  of- 

(The  "year"  as  hereinafter  nsed  means  the  calendar  year  or  Sac*!  year  as  the  cage  may  be. ) 

1.  Total  amount  of  paid-up  capital  stock  outstanding,  or,  if  no  capital  stock  the  capital  employed  in 
business,  at  close  of  the  year  above  stated.    (See  Note  8  on  reverse  of  this  form) $ 


2.  Total  amount  of  bonded  and  other  indebtedness  outstanding  at  close  of  year.     (See  Note  9) «.. 


3.  GROSS  INCOME  (see  Note  A,  and  instructions,  paragraphs  10,  18,  21,  22,  23,  25,  and  36) 

DEDUCTIONS. 

4.  (a)  Total  amount  of  all  the  ordinary  and  necessary  expenses  of  mainte- 

nance and  operation  of  the  business  and  properties  of  the  corporation 

EXCLUSIVE  OF  INTEREST  PAYMENTS.      (See  Note  B) $ 

(6)  All  rentals  or  other  payments  required  to  be  made  as  a  condition  to 
:  the  continued  use  or  possession  of  the  property.  (See  Note  12  on 
reverse  of  this  form) |u___^ 

5.  (a)  Total  amount  of  losses  sustained  during  the  year  not  compensated  by 

insurance  or  otherwise $ 

(6)  Total  amount  of  depreciation  for  the  year.     (See  Note  13) I. 


(o)  Total  amount  (other  than  dividends)  paid  within  the  year  on  policy 

and  annuity  contracts $ 

•((Z)  Total  amount  of  net  addition  required  by  law  to  be  made  within  the 

year  to  reserve  fund.     (See  ,Note  28) •.... 

(e)  Amounts  of  premiums  repaid'  to  policy  holders  and  interest  paid 

thereon  (applicable  only  to  Mutual  Marine  Insurance  companies)...     $ — 

6.  (a)  Total  amount  of  interest  accrued  and  paid  within  the  year  on  an 

amount  of  bonded  or  other  indebtedness  not  exceed  ing  one-half  of  ttie  sum  of  its  interest, 
bearing  indebtedness  and  its  paid-up  capital  stock  outstanding  at  the  close  of  the  year-*.     fL-. 
(6)  Total  amount  of  interest  received  upon  obligations  of  a  State  or  political 
subdivision  thereof  and  upon  the  obligations  of  the  United  States  or 
its  possessions ^ $„ 

7.  (a)  Total  taxes  paid  during  the  year  imposed  under  authority  of  the 

United  States  or  any  State  or  Territory  thereof.     (See  Note  20) t... 


(6)  Foreign  taxes  paic  . 


TOTAL  DEDUCTIONS - , t.. 


8.  Net  income  on  which  tax  at  1  per  centum  is  calculated  ...........................................     $.  ____  ...........  :  .......  ..,  ____  ...... 

STATE  OF  .....................  _  ..................  _____  .........  ,  County  of  _  ............  _  .....................  _______________  ,  TO  WIT: 

.  .........................  .  .................................  _  .............  ,  President,  and  ......................................................  _  ............  _  ......  ,  Treasurer  of 

the  ....................  ________  ..........................  _,.  ____  ......  a  corporation,  whose  return  of  annual  net  income  is  set  forth  above,  being  severally 

duly  sworn,  each  for  himself,  deposes  and  says  that  the  foregoing  report  and  the  several  items  therein  set  forth  are,  to  his  best 
knowledge  and  belief  and  from  such  information  as  he  has  been  able  to  obtain,  true  and  correct  in  each  and  every  particular;  that 
the  amount  of  gross  income  therein  set  forth  is  the  full  amount,  of  gross  income,  including  interest  upon  obligations  of  a  State  or 
any  political  subdivision  thereof,  and  upon  the  obligations  of  the  United  States  or  its  possessions,  without  any  deduction  whatso- 
ever, received  from  all  sources  by  the  said  corporation  during  the  year  stated,  and  that  the  net  income  therein  set  forth  is  the  full 
femount  upon  which  the  tax  at  1  per  centum  is  to  be  calculated  and  assessed  under  the  terms  of  the  Federal  Income  Tax  Law  of 
October  3,  1913. 

SWORN  AND  SUBSCRIBED  to  befo 


day  of  ______  ............  _  ..................  ,  191  President. 


(Official  capacity 


of  insurance  companies  shall  consist  of  the  total  of  the  gross  revenues  derived  from  the  operation  and  ma 


the  gross 

ng  divide 


Mutual  marine  insurance  companies  may  exclude  from  the  gross  premiums  collected  the  "amounts  paid  for  reinsurance,"  including  the  remainder 
income 

Mutual  fire  insurance  companies  may  omit  from  gross  income  "  any  portion  of  the  premium  depoeita  returned  to  their  policy  holdew." 
Life  " 


. 

mpanies  may  also  omit  from  their  gross  income  "such  portion  of  any  actual  premium  received  from  any  individual  po'icyholder  aa  shall  have 

been  pai'l  back  or  f  redited  to  such  policyholder,  or  treated  as  an  abatement  of  premium  of  puch  individual  policynolder  -within  toe  year."    The  "amount  thna  omitted 
shall  include  only  such  dividends  or  premiums  returned  or  applied  a&  represent  a  portion  of  the  actual  premium  received  from  any  "individual  policyholder. 

'  Nora  B.—  The  deductions  authorized  shall  include  all  expense  items  under  the  various  heads  acknowledged^  liabilities  by  the  corporation  making  the  return 
and  entored  upon  its  books  during  the  year. 

Amounts  of  iucome  expends!  in  paying  dividends  on  stock,  preferred  or  common,  or  in  making  permanent  improvements  or  bettormaotg,  etc.,  or  in  any  way 
transferred  to  capita!  account  are  not  proper  deductions  in  ascertaining  annual  net  income.  Interest  r.  uid  ou  mort#ago  indebtedness  on  real  estate  occupied  or  osed 
by  a  corporation  maybe  deducted  unrior  Item  4  if  th*  ir.!;-:oa  \»  paid  us  rental  or  franchise  charge,  payment  of  which  w  required  to  b«  rtai'e  as  a  condition  to  the 
contour,'  '1  use  aud  poaseesiou  of  the  prupcuy.  The  amount  so  paid  and  included  in  Item  4  should  best&ted  separately  utider  Iteiii  4(6).  (See  Note  12  on  reverie  of 
this  iorii.)  t-1M> 

81 


INSTRUCTIONS  FOR  1030 
Annual  Return  by  Insurance  Companies  (1030) 

SPECIAL  NOTICE. — This  form,  properly  filled  out  and  executed, 
must  be  in  the  hands  of  the  Collector  of  Internal  Revenue  for  the  district 
in  which  is  located  the  principal  business  office  of  the  corporation  making 
the  return,  on  or  before  March  1,  in  case  the  return  is  based  on  the 
calendar  year,  or  within  60  days  after  the  expiration  of  the  fiscal  year  in 
case  the  return  is  made  on  that  basis. 

For  failure  to  comply  with  this  provision  of  the  law,  the  amount  of 
the  assessment  is  increased  50  per  cent  and  liability  to  a  specific  penalty 
not  exceeding  $10,000  is  incurred. 

1.  Return  of  annual  net  income  of  corporations  should  be  made  on  forms 
prescribed  by  the  Treasury  Department  and  should  be  filed  with  the  Collector 
of   Internal  Revenue  of  the  district  in  which   such   corporations  have  their 
principal  places  of  business. 

2.  Before  transmitting  such  returns  to  the  collectors  they  must  be  verified 
by  two  officers  of  the  corporation;  that  is,  by  two  individuals,  each  holding  a 
different  official  title,  namely:  the  President,  Vice   President,  or  other  prin- 
cipal  officer  and   its  Treasurer  or   Assistant   Treasurer,   or   Chief   Financial 
Officer. 

3.  The  affidavit  of  verification  must  be  made  before  a  Notary  Public  or 
some  other  officer  qualified  to  administer  oaths,  and  the  seal  of  the  attesting 
officer,  if  such  officer  is  required  by  law  to  have  a  seal,  must  be  impressed 
on  the  return  in  the  space  reserved  for  that  purpose. 

4.  Under  the  provisions  of  the  law,  the  return  must  be  true  and  accurate 
in  every  respect  and  must  disclose  all  the  income  arising,  accruing,  or  re- 
ceived from  all  sources  during  the  year  for  which  the  return  is  made. 

5.  If  the  return  is  based  upon  the  business  transacted  during  the  calen- 
dar year,  it  should  be  filed  with  the  collector  on  or  before  the  first  day  of 
March  next  succeeding  such  calendar  year.     If   it  is  made  on  the  basis  of 
business  transacted  during  a  fiscal  year,  or  consecutive  twelve  months  period 
other  than  the  calendar  year,   duly   designated   in   accordance  with   the  law 
and  the  regulations,  the  return  must  be  filed  with  the  collector  on  or  before 
the  last  day  of  the  6o-day  period  next  following  the  date  designated  as  the 
close  of  the  fiscal  year. 

6.  In  case   of   sickness   or   absence  of   an   officer   required  to   verify  the 
return,   the   collector  of   the   district   is   authorized   to   extend   the   time   for 
filing  such  return  not  exceeding  thirty  days   from  the  date  when   such   re- 
turn is  otherwise  due.     Application  for  such  extension  must  be  made  prior 
to  the  date  when  the  return  is  due. 

7.  The  principal  place  of  business  as  used  in  the  act  and  in  these  regu- 
lations  is   held  to  mean  the  place  or  office   in  which   the  books  of  account 
and   other   data  to  be   used   in   preparing  the   return  of   annual   net   income 
are  ordinarily  kept. 

8.  Item  No.  1  of  the  schedule  on  the  reverse  side  of  this  form  should 
not  include  unissued  or  treasury  stock,  but  only  such  stock  as  has  actually 
been  issued  and  for  which  payment  has  been  received,  or  in  case  no  stock 
is  issued,   there   should  be  reported  under  this  item  the  amount  of   capital 
actually  employed  in  the  business  and  property  of  the  corporation. 

In  cases  wherein  the  capital  stock  is  issued  payable  in  installments  or  upon 
assessment,  only  so  much  of  the  capital  as  has  been  actually  paid  in  upon 
such  installments  or  assessments  should  be  reported  under  this  item. 

9.  Item   N'o.   2  should   include   all   interest-bearing  indebtedness   for   the 
payment   of  which   the   corporation    or   its   property   is   bound.     In    case   of 
banking  corporations  and  like  financials  institutions,  deposits  should  not  be 
reported  as  indebtedness  under  this  head. 

10.  Item   No.   3  of  the  return   form    (gross   income)    should   include  all 
income  derived   from  the  operations   and  management  of  the  business  and 
properties,  together  with  all  actual  increases  in  value  by  appraisement,  ad- 
justment, or  otherwise  in  the  value  of  the  assets  which  have  been  taken  up 

82 


Instructions  for  1030  cont'd. 

on  the  books  as  income  or  credited  to  profit  and  loss  during  the  year.  In 
the  case  of  a  corporation  organized,  authorized,  or  existing  under  the  laws 
of  any  foreign  country,  the  gross  income  to  be  returned  is  the  gross  amount 
of  its  income  for  the  year,  resulting  from  business  transacted  and  capital 
invested  within  the  United  States. 

11.  Item  No.  4  (a)  should  include  the  total  amount  of  all  ordinary  and 
necessary  expenses  paid  out  of  earnings  in  the  operation  of  the  business 
and  properties  of  the  corporation,  etc.,  exclusive  of  interest  and  other  pay- 
ments to  be  listed  under  their  respective  heads  on  the  return  forms. 


12.  Item  No.  4(fr)   should  include  all  rentals  or  other  payments  required 
to  be  made  as  a  condition  to  the  continued  use  or  possession  of  the  property; 
that  is  to  say,  in  cases  where  interest  on  a  mortgage  on  property  occupied 
or  used  by  the  corporation  is  paid  as  a  condition  to  its  possession  and  use, 
thus  becoming  in  the  nature   of  a  rental  charge,   such  interest   charge  may 
be   included   in   the  deduction  under  this  item.     Mortgage  indebtedness,   as- 
sumed or  unassumed,  on  property  to  which  the  corporation  has  taken  or  is 
taking  title,  or  in  which  it  has  an  equity,  or  in  the  acquirement  of  which  the 
mortgage  was  considered  a  part  of  the  purchase  price,  is  held  to  be  a  debt 
of  the  corporation,  and  interest  paid  on  such  indebtedness  will  be  deductible 
only  under  Item  6  of  the  return,  and,  together  with  other  interest  charges, 
must  not  exceed  the  limit  fixed  by  the  law  for  such  interest  deductions. 

13.  The  amount  claimed  under  Item   No.  5(fc)    for   depreciation   should 
be    such    an    amount   as    measures   the    loss    which   the   corporation    actually 
sustains  during  the  year  in  the  value  of  buildings,  machinery,  and  such  other 
property  as  is  subject  to  depreciation  on  account  of  wear  and  tear,  exhaus- 
tion, or  obsolescence.     The  amount  taken  credit  for  on  this  account  in  order 
to  be  allowable  should  be  so  entered  on  the  books  as  to  constitute  and  show 
as   a  liability   against   the   assets   of   the   corporation.     The   amount   claimed 
under  this  item  should  not  cover  losses  in  the  value  of  stocks  and  bonds. 
The  change  in  the  value  of  stocks  and  bonds  is  properly  taken  up  in  the 
inventories   or   annual    adjustment   in   the   value   of   such   securities   and   the 
income   or   losses   indicated  by  this   adjustment!   may   be   accounted    for   ac- 
cordingly. 

14.  Where  depreciation  of  physical  property  is  made  good  by  renewals, 
replacements,  repairs,  etc.,  and  the  expense  of  such  renewals,  replacements, 
repairs,  etc.,  is  charged  to  the  general  expense  account,  no  deduction  for  de- 
preciation can  be  'made  in  the  return  of  annual  net  income.     Where  a  depre- 
ciation reserve  is  set  up,  all  renewals  and  replacements  must  be  charged  to 
such    reserve    and   the    addition    to   this    reserve    each   year   must   be   a    fair 
measure  of   the  loss  which  the   corporation    sustains  by   reason   of  the   de- 
preciation of  its  property. 

15.  The  amount  of  interest  deductible  is  the  amount  of  interest  accrued 
and  paid  within  the  year  on  its  bonded  or  other  indebtedness  not  exceeding 
one-half    of   the    sum    of    its    interest-bearing    indebtedness    and    its    paid-up 
capital  stock  outstanding  at  the  close  of  the  year,  or  if  no  capital  stock,  the 
amount  of  interest  paid  within  the  year  on  an  amount  of  indebtedness  not 
exceeding  the  amount  of  capital   employed  in  the  business  at  the   close  of 
the  year;   or  in  case  of  a  corporation,  joint   stock  company',  or  association, 
or    insurance    company    organized    under    the    laws    of    a    foreign    country, 
interest  so  paid  on  its  bonded  or  other  indebtedness  to  an  amount  of  such 
bonded   or  other   indebtedness  not   exceeding  the  proportion   of   its  paid-up 
capital   stock   outstanding   at  the   close   of  the  year,   or  if   no  capital   stock, 
the  amount  of  capital  employed  in  the  business  at  the  close  of  the  year,  which 
the  c/ross  amount  of  its  income  for  the  year  from  business  transacted  and 
capital  invested  within   the    United  States  bears   to   the  gross  amount  of  its 
income  derived  from  all  sources  within  and  without  the   United  States. 

All  interest  deductions  must  be  claimed  under  Item  6  on  the  return  form. 

16.  Dividends   declared   or   paid   are  not   deductible   from   gross   income. 

17.  Dividends    received   upon   the    stock-  of   other   corporations   must   be 
included    in    gross    income    and,    under    the    provisions    of    the   law,    are    not 

83 


Instructions  for  1030  cont'd. 

deductible  therefrom  in  the  ascertainment  of  the  net  income  on  which  the 
tax  is  computed. 

•18.  Interest  received  upon  the  obligations  of  a  State  or  any  political 
subdivision  thereof  and  upon  the  obligations  of  the  United  States  or  its 
possessions  should  be  included  in  gross  income,  as  well  as  all  other  interest 
due  and  accrued  during  the  period  for  which  return  is  made. 

19.  Accrued  interest  is  considered  to  be  interest  due  and  payable,  except 
in    the    cases    of    banking   or    other    similar    institutions    which    close    their 
accounts  on  the  basis  of  the  interest  earned.     In  all  cases  the  accrued  in- 
terest shall  be  reported  on  the  basis  on  which  the  books  are  closed. 

20.  Taxes  for  which  credit  may  be  taken  in  the  return  are  such  tax*es, 
actually  paid  within  the  year,  as  are  imposed  by  authority  of  the  United 
States  or  of  any  State  or  Territory  thereof,  or  by  the  government  of  any 
foreign    country,    not    including    taxes    paid    by    a   corporation,    pursuant    to 
guaranty,   on   its  bonds   or  the   income   therefrom   and   not  including  those 
taxes  assessed  against  local  benefits.     A  reserve  for  taxes  as  such  is  not 
deductible,  but  only  taxes  actually  paid. 

21.  Reinsurance   (except,  as  provided  by  Note  23)   and  return  premiums 
should  not  be  included  in  either  gross  income  or  deductions ;  as  "net  written 
premiums,"  agreeing  with  report  to  States,  should  be  shown. 

22.  Mutual   fire   insurance   companies   which    require   their   members   to 
make  premium  deposits  to  provide  for  losses  and  expenses  need  not  return 
as  income  any  portion  of  the  premium  deposits  returned  to  their  policy- 
holders. 

23.  Mutual  marinjs  insurance  companies  shall  include  in  their  return  of 
gross  income  the  gross  premiums  collected  and  received  by  them,  less  re- 
insurance.    (See  Note  21). 

24.  Mutual  marine  insurance  companies  are  entitled  to  deduct  from  gross 
income  amounts  repaid  to  policyholders  on  account  of  premiums  previously 
paid  by  them  and  interest  paid  upon  such  amounts  between  the  ascertain- 
ment thereof  and  the  payment  thereof. 

25.  Life  insurance  companies  need  not  include  as  income  in  any  year 
such  portion  of  any  actual  premium  received   from  any  individual  policy- 
holder  as  shall  have  been  paid  back  or  credited  to  such  individual  policy- 
holder,  or  treated  as  an  abatement  of  premium  of  such  individual  policyholder 
within  such  year. 

26.  Mutual  fire  insurance  companies  must  return  as  income  such  portions 
of  premium  deposits  are  are  retained  by  the  companies  for  purposes  other 
than  the  payment  of  losses  and  expenses  and  reinsurance  reserves. 

27.  The  deduction  allowed  under  the  act  of  August  5,  1909,  of  amounts 
received  as  dividends  upon  stock  of  other  corporations  subject  to  the  tax 
therein  imposed  is  not  allowed  under  the  act  of  October  3,  1913. 

28.  In  the  case  of  assessment  insurance  companies,  whether  domestic  or 
foreign,   the  actual  deposits  of   sums  with  the  State  or  Territorial   officers 
pursuant  to  law,  as  additions  to  guarantee  or  reserve  funds  shall  be  treated 
as  being  payments  required  by  law  to  reserve  funds. 


84 


TO  ?E  FILLED  IN-  BY  COLLECTORS.  Form  1031.  TO  BE  FILLED  IN  BY  INTERNAL  REVE 

THE  PMftLTV  1»r  failure  to  hove  thle  Return 

Us,  NO MUSS In  the    h.nde    ef   the    Collector    ~>    lnt.rn.1 

Revenue  en  er  before  March  ..  .. 

District  Of di,»  after  the  cloae  of  the.  fiscal  yea 

aura  not  exceeding  SIO.OOO. 
Bait  received  •  Wl-\ 


(Soe  I 
UNITED  STATES  INTERNAL  REVENUE. 


RETURN  OF  ANNUAL  NET  INCOME. 

(S.ction  3,  Act  of  Coujrw  .pprov.d  Ottob.r  ^  1913.) 


BANKS  AND  OTHER  FINANCIAL  INSTITUTIONS. 


RETURN  OF  NET  INCOME  received  during  the  year  ended ,  191 


a  corporation,  the'  principal  place  of  business  of  which  is  located  af  _______________________  ....................  _____________ 

City  or  Town  of  '.  ...............................................  ________  .........  r....  ,  in  the  State  of  _______  ,  ____________________________ 

(The  "  year'-'  as  hereinafter  used  means  the  calendar  year  or  fiscal  year  as  the  case  may  be.) 

1.  Total  amount  of  paid-up  capital  stock  outstanding  at  close  of  the  year,  or  if  no  capital  stock,  the 

capital  employed  in  the  business  at  the  close  of  the  year  ....................................    $_ 


3.  Total  amount  of  bonded  and  other  indebtedness  outstanding  at  close  of  year. 


3.  GB099  INCOME  (see  Note  A,  and  instructions,  paragraphs  10,  \1,  18,  wad  1») 

DEDUCTIONS. 

4.  (a)  Total  amount  of  all  the  ordinary  and  necessary  expenses  paid  within 

the  year  in  the  maintenance  and  operation  of  the  business  and  prop- 
erties of  the  corporation  KXOUISIVB  01-  IXTEBBST  PAYMENTS.    (See 
NoteB)  .......  ..  ...............................  :  ............  .... 

(6)  All  rentals  or  other  payment*  required  to  be  made  ae  a  -condition  to 
the  continued  use  or  possession  of  the  property.  (See  paragraph  19 
on  reverse  of  this  form)  .......................................  ... 

5.  (a)  Total'  amount  of  losses  sustained  during  the.  year  not  compensated  by 

insurance  or  otherwise  .........  .....  .......  ,  ........  .  ............. 

(6)  Total  amount  of  depreciation  for  the,  year.  .  .........................    $  ______ 

«.  (a)  Total  amount  of  interest,  exclusive  of  interest  on  deposits,  accrued  and 
paid  within  the  year  on  an  amount  of  bonded  or  other  indebtedness  not  exceeding  one- 
half  of  the  ram  of  its  interest-bearing  indebtedness  and  its  paid-up  capital  Block  out- 
standing at  the  close  of  the  year;  or  if  no  capital  stock,  the  amount  of  interest  paid 
within  the  year  on  an  amount  of  its  indebtedness  not  exceeding  the  amount  of  capital 
employed  ia  the  busineM  at  the  clone  of  the  year  ...........  _  ......................  •-- 

(6)  Total  amount  of  interest  paid  within  the  year  on  deposits  ............    »— 

(o)  Total  amount  of  interest  received  upon  obligations  of  a  State  or  political 
subdivision  thereof,  and  upon  the  obligations,  of  the  United  States 
or  its  possessions  ..............  ,.,  .......  .......7*  ............  ......  $... 

7.  (a)  Total  taxes  paid  during  the  year  imposed  under  authority  of  the 

United  States  or  any  State  or  Territory  -thereof..,.  ...........  -  .....    *_ 

(Z>)  JToreign  taxes  paid  ...........  ..........  _•.,„  .......  ..  .....  „.  .......  .    »„ 

TOTAL  DEDUCTIONS  ..................  ....................  -. 

8.  Net  income  on  which  tax  at  1  perca-iumis  calculated  ....................... 


f ,  TO  WIT!  • 

•_ __., ,  President,  and -    Treasurer,  of 

the '. , ^a  corporation,  whose  return  of  annual  net  income  is  set  forth  above,  being 

severally  duly  sworn,  each  tor  himself,  deposes  and  says'  that  the  foregoing  report  and-  the  several  item* .therein  set  forth  are,  to 
his  best  knowledge  and  belief  and  from  such  information  as  he  has  been  able  to  obtain,  true  and  correct  in  each  and  every  partic- 
ular; that  the  amount  of  gross  income  therein  set  forth  is  the  full  amount  of  gross  income,  without  any  deduction  whatsoever, 
received  from  all  sources  by  the  said  corporation  during  the  year  stated,  and  that  the  net  income  therein  get  forth  is  the  full  amount 
upon  jrhich  the  tax  at  1  per  centum  is  to  be  calculated  and  assessed. 

SWOBN  AND  SUBSCRIBED  to  before  me  this _ 


day  of ,  191  President. 


Treasurer. 


»  mcome  shall  consist  of  the  total  revenues  derived  from  the  operation  and „ ,    .          .      _ 

"     her  subject  to  this  ta:  or  not,  and  interest  received 
>  its  possessions,  at  shown  by  entries  ucon  its  books 
during  the  year  for  which  the  return  is  made. 

Nora  B.— The  deductions  authorized  shall  include  all  expense  items  under  the  various  heads  acknowledged  as  liabilities  by  the  corporation  making  the  return 
and  entered  upon  its  booka  during  the  yea*,,  Amountsof  income  expended  in  paying  dividends  on  stock,  preferred  or  common,  or  rn  inakiii  permanent  improvements 
or  betterments,  etc..  or  io  any  way  transferred  to)  capital  account,  should  not  be  deducted  in  ascertaining  annual  net  income.  Interest  paid  on  mortgage  indebtadne;} 
on  real  estate  occuliied  or  used  by  a  corporation  may  be  deducted  under  Item  4,  if  the  interest  is  paid  as  a  rental  or  franchise  charge,  payment  ol  which  it 
required  to  be  made  as  a  condition  to  the  continued  use  and  possession  of  the  property.  The  amount  so  paid  and  included  in  Item  4  should  be  stated  sepautaly 
radar  Item  4  (t).  (See  potagrtpli  12  on  reverse  of  this  fonn.)  2-Ktt  .'_ 

85 


TO  BE  FILLED  IN  BY  COLLECTORS.  Form  1O32.  TO  BE  FILLED  IN  BY  INTERNAL  REVENUE  BUREAU 


...................          th»  hand*  of  tho  Collector  of  Internal  Revonuo       ...  .... 

on  or  bofor.  March  I,  or  within  6O  d.ym  after      Assessment  List 
...............  District  of  ..............................          th«  close  of  the  fiscal  yoar.  Is  •  sum  not  ex- 

ceeding SIO.OOO. 

Date  received  ................  _  ................  ,  191  <s  .....  tr.oti...  ..  .t».r  .11.0  Page  ..................  ....   Line 

UNITED  STATES  INTERNAL  REVENUE. 


RETURN  OF  ANNUAL  NET  INCOME. 

(Section  2,  Act  of  Cengrm  .pprovod  Ociob>r  3,  1913. ) 


PUBLIC  SERVICE:   CORPORATIONS. 

RETURN  OF  NET  INCOME  received  during  the   °"ar   year  ended _ ...  191 


(Mime  of  colpontlon,  Joint  Mock  COB1J* 

the  principal  place  of  business  of  which  is  located  at  — 

City  or  Town  of - _ - -~~~ ,  in  the  State  of... 

(The  "year"  as  hereinafter  need  means  the  calendar  year  or  fiscal  year  as  the  case  may  be.) 

tock,  the 


1.  .Total  amount  of  paid-up  capital  stock  outstanding  at  close  of  the  year,  or  if  no  capital  s 

capital  employed  in  the  business  at  the  close  of  the  year 

2.  Total  amount  of  bonded  and  other  indebtedness  outstanding  at  close  of  year 


3.  GE088  INCOME  (see  Note  A,  and  instructions,  paragraphs  10,  17,  18,  and  19).. $... 

DEDUCTIONS. 

4.  (a)  Total  amount  of  altthe  ordinary  and  necessary  expenses  paid  within  the 

year  in  the  maintenance  and  operation  of  the  business  and  properties 

of  the  corporation,  EXCLUSIVE  OP  INTEREST  PAYMENTS.  (See  Note  B).    t_ 

(6)  All  rentals  or  other  payments  required  to  be  made  as  a  condition  to 
the  continued  use  or  possession  of  the  property.  (See  paragraph  12 
on  reverse  of  this  form) $ _ 

5.  (a)  Total  amount  of  losses  sustained  during  the  year  not  compensated  by 

insurance  or  otherwise $ _ 


(6)  Total  amount  of  depreciation  for  the  year.   (See  paragraphs  13  and  14).    t 

6.  (a)  Total  amount  of  interest  accrued  and  paid  within  the  year  on  an 

•mount  of  bonded  or  other  indebtedness  not  exceeding  one-half  of  the  ram  of  its 
interest-bearing  indebtedness  and  its  paid-up  capital  stock  outstanding  at  the  close  of  the 
year,  or  if  no  capital  stock,  the  amount  of  interest  paid  within  the  year  on  an  amount 
of  its  indebtedness  not  exceeding  the  amount  of  capital  employed  in  the  business  at  the 

close  of  the  year I- 

(6)  Total  amount  of  interest  received  upon  obligations  of  a  State  or 
political  subdivision  thereof,  and  upon  the  obligations  of  the  United 
States  or  its  possessions ^. 

7.  (a)  Total  taxes  paid  during  the  year,  imposed  under  authority  of  the 

United  States  or  any  State  or  Territory  thereof t , _ 

(&)  Foreign  taxes  paid * 

TOTAL  DEDUCTIONS , *. 

8.  Net  income  on  which  tax  at  1  per  centum  is  calculated •. $.. 


STATE  OP  ._ ,  County  of. ,  TO  WIT: 

,_,_._,.. :.,  President,  and _ _ ,  Treasurer,  of 

the .,  a  corporation,  whose  return  of  annual  net  income  is  set  forth  above,  being  severally 

duly  sworn,  each  for  himself,  deposes  and  says  that  the  foregoing  report  and  the  several  items  therein  sot  forth  are,  to  his  best 
knowledge  and.  belief  and  from  such  information  as  he  has  teen  able  to  obtain,  true  aud  correct  in  each  and  every  particular;  that 
the  amount  of  gross  income  therein  set  forth  is  the  full  amount  of  gross  income,  without  any  deduction  whatsoever,  received  from 
all  sources  by  the  said  corporation  during  the  year  stated,  aud  that  the  net  income  therein  set  forth  is  the  full  amount  upon  which 
the  tax  at  1  per  centum  is  to  be  calculated  and  assessed. 

SWORN  AND  SUBSCRIBED  to  before  me  this  _ 

day  of ,  191  'President 


NOTE  /L.— Gross  income  shall  consist  of  the  total  ravenues  derived  from  the  operation  and  management  of  its  business  and  properties,  together  with  all  amounts 
of  income  from  other  sources,  including  dividends  received  on  stock  of  other  organizations,  whether  subject  to  this  tax  or  not,  and  interest  received  upon  obligation* 
of  a  State  or  political  subdivision  thereof,  and  upon  the  obligations  of  the  United  States  or  its  possessions,  as  shown  by  entries  upon  its  books  during  the  year  for 
which  return  is  made. 

pense  items  under  the  various  heads  acknowledged  as  liabilities  by  the  corporation  making  the  return 
..  of?  income  expended  in.  paying  dividends  on  stock,  preferred  or  common,  or  in  making  permanent  improvements 

or  betterments,  etc.,  or  in  any  way  transferred  to  cr.pital  account,  should  not  be  deducted  in  ascertaining  annual  net  income.  Interest  paid  on  mortgage  indebtedness 
on  real  estate  occupied  or  used  by  a  -corporation  may  be  deducted  under  Item  4,  if  the  inttrest  ia  paid  as  rental  or  franchise  charge,  payment  of  which  in  required 
to  be  made  as  a  condition  to  the  continued  use  and  possession  of  the  property.  The  amount  RO  paid  and  included  in  Item  4  should  be  stated  separately  under  Item  4  (&). 
(See  parsjrsph  12  on  reverse  of  this  form.)  c  6-iwo 


86 


TO  BE  FILLED  IN  BY  COLLECTORS.  Korm  1CW3.  TO  BE  FILLED  IN  BY  INTERNAL  REVENUE  BUREAU. 

i :../  u.  /•>•„„  THE   PEHftLTY  for  fallur.  t.  ha*.  tbl»-  Return 

-~-~-          !•    th»    b..d.    of   th.    C.ll.otor   of   lat.rn.l      A,,gsmmt  IS,,  101 

„.  ...    ,  •«••«.  on  or  bofor.    M.rok  I.  .r  within  «0     a*""*™'""- •  '«" 

''"  °J  —        day*  aft.r  th.  «!•••  cf  th.  fi.o.l  r..r,  U  • 


UNITED  STATES   INTERNAL  REVENUE. 


RETURN   OF  ANNUAL  NET   INCOME. 

(Section  2,  Act  of  Congress  approved  October  3, 1913.J 


MANUFACTURING    CORPORATIONS. 


•     RETURN  OF  NET  INCOME  received  during  to.  year  ended  .....................................................  ,  191 

by  .....................................  •„._  .......  :  ...............  .  .....  .,.'.  ........................  :  ...............  .  ...............................  ......  ......................... 

•       (S«Mofcorjx»»UOT,  Joint 

the  principal  place  of  business  of  -which  is  located  at  .............  : 


City  or  Town  of.  .........................  .-...  ..........  :.  ............  .  ....................  ,  in  the  State  of  ............  ; 

(The  "year"  as  hereinafter  used  means  the  calendar  year  or  fiscal  year  aa  tho  case  may  be.) 

1.  Total  amount  of  paid-up  capital  stock  outstanding  at  close  of  the  year,  or  if  no  capital  stock,  the 

capital  employed  in  the  business  at  the  close  of  the  year  ...........  .'....  ..,!  .................  ...     $. 

2.  Total  amount  of  bonded  and  other  indebtedness  outstanding  at  close  of  year..,»  ......  .  ......  -..    $.^ 


3.  QBOSS  INCOME  (see  Note  A,  and  instructions,  paragraphs  10,  17,  18,  19,  22,  and  83). 

DEDUCTION'S. 

4.  (a)  Total  amount  of  all  the  ordinary  and  necessary  expenses  paid  within 

the  year  in  the  maintenance  and  operation  of  the  Dusiness  and  prop- 
erties of  the  corporation  EXCLUSIVE  OP  INTEREST  PAYMENTS,  (see 

Note  B  and  paragraph  23) ^......    $. 

(6)  All  rentals  or  other  payments  required  to  be  made  as  a  condition  to 
the  continued  use  or  possession  of  the  property  (see  paragraph  12 
on  reverse  of  this  form) '..» t 

6.  (a)  Total  amount  of  losses  sustained  during  the  year  not  compensated  by 

insurance  or  otherwise ; $ 

(6)  Total  amount  of  depreciation  for  the  year  (see  paragraphs  13  and  14) .    $ 

6.  (a)  Total  amount  of  interest  accrued  and  paid  within  the  year  on  an 

amount  of  bonded  or  other  indebtedness  not  exceeding  one-half  of  the  sum  of  its 
interest-bearing  indebtedness  and  ito  paid-up  capital  stock  outstanding  at  the  close  of 
the  year;  or  if  no  capital  stock,  the  amount  of  interest  paid  within  the  year  on  an 
amount  of  its  indebtedness  not  exceeding  the  amount  of  capital  employed  in  the 

business  at  the  close  of  the  year .?. $ 

(6)  Total  amount  of  interest  received  upon  the  obligations  of  a  State  or 
political  subdivision  thereof,  and  npon  the  obligations  of  the  United  ... 
States  or  its  possessions •. $_ 

7.  (a)  Total  taxes  paid  duringtbe  year,  imposed  tinder  authority  of.  the  United 

States  or  any  State  or  Territory  thereof ; ; IL. :.... 

(6)  Foreign  taxes  paid .• •.. , ».  $ 

ToiAil  DEDUCTIONS 


8.  Net  income  on  which  tax  at  1  per  centum  is  calculated. . 


.  Nora.— The  above  blank  spaces  for  figures  should  show  the  amount  of  each  respective  item.  If  there  is  nothing  -to  return  as  to  any  item,  the  word  "none" 
must  be  written  in  such  blank  spaces.  ____^_______ 

STATE  OF . ,  County  of ,._„ . „ ,  TO  WIT: 

, =.:...,  President,  and — __ . ,  Treasurer,  of 

the ... _ ;....,  a  corporation,  whose  return  of  annual  net.  income  is  set  forth  above,  being  severally 

duly  sworn,  each  for  himself,  deposes  and  says  that  the  foregoing  report  and  the  several  items  therein  set  forth  are,  to  his  best 
knowledge  and  belief  and  from  such  information  as  he  has  been  able  to  obtain,  true  and  correct  in  each  and  every  particular;  that 
the  amount  of  gross  income  therein  set  forth  is  the  full  amount  of  gross  income,  without  any  deduction  whatsoever,  received  from 
all  sources  by  tho  said  corporation  during  the  year  stated,  and  that  the  net  income  therein  set  forth  is  the  fall  amount  npon 
/Which  the  tax  at  1  per  centum  is  to  be  calculated  and  assessed. 

SWORN  AND  SUBSCRIBED  to  before  me  this  _ 

,  191  President. 


AQUAVIT.  - — - Treasurer. 

(OOctal  ttp«eft7.) 


NOTE  A.— Gross  income  in  the  case  of  a  manufacturing  corporation  shall  include  the  total  receipts  from  all  manufactured  goods  sold  during  the  year,  increa! 
•or  decreased  accordingly  u  then  is  gain  or  loss  ascertained  through  an  accounting  or  inventory  of  the  finished  and  unfinished  product,  raw  material,  etc.,  on  ha 
at  the  close  the  year.  To  Jhe  income  thus  ascertained  there  shoufd  be  added  theincome  received  from  any  and  all  other  sources,  including  dividends  received 
stock  of  other  organization*  whether  subject  to  this  tax  or  not,  and  interest  received  on  the  obligations  of  a  State  or  political  subdivision  thereof,  and  int 


on  the  obligations  cf  the  United  States  or  its  possessions,  the  aggregate  to  be  the  gross  i 


NOTS  B.— The  deductions  authorized  shall  include  all  expense  items  under  the  various  heads  acknowledged  as  liabilities  by  the  corporation  making  the  returg 
and  entered  on  its  books  during  the  year.  "  Total  amount  of  all  ordinary  and  necessary  expenses,"  etc.,  shall  include  expenditures  for  material,  labor,  salaries,; 
wages,  fuel,  and  other  expenses  incident  to  the  cosKf  the  finished  product.  Amounts  ofinoom*  apendtd  tn  paying  diwdtnb  on  rtoci,  preferred  or  common,  or  in 
making  permanent  improvements  or  betterments,  etc.,  or  in  any  way  transferred  to  property  account,  lAouU  not  bt.  fo&wted  in  atcataining  At  net  intxmt  upon  which 
the  tax  u  computed.  Interest  paid  ss  rental  or  in  lim  of  rental  is  deductible  under  Item  4  (i)  (Seo  paragraph  12  on  the  reverse  of  this  form.)  01-7351 


87 


TO  BE  FILLED  IN  BY  COLLECTORS.  Form  1O34.  TO  BE  FILLED  IN  BY  INTERNAL  REVENUE  BUREAU. 

list  H,        '  Clast  T 


.  -. 

.-—  ..........  uismct  oj  .....  -------  ,  -----------------       -aj,  ,ft.r  th.  clos.  of  th.  „.„.,  for<  ,,  „ 

.......  -  ...............  «*   .....  s-sssa^' 

UNITED  STATES   INTERNAL  REVENUE. 


RETURN   OF  ANNUAL  NET   INCOME. 

(Section  2,  Act  of  Congress  approved  October  3,  1913.  ) 

MERCANTILE     CORPORATIONS. 

(Corporations  whoso  principal  business  is  baying  and  selling.) 

RETURN  OF  NET  INCOME  received  during  the.  \ffttr\  year  ended  .......  _____  ......  ______________  ,  ..............  , 


757 


.  oint  .tockc.op«,r,«,.««i«l<,nO 

'ihe  principal  place*  of  business  of  which  is  located  at  ....................  _.!.!_... 

• 


City  or  Town  of . .-. ,  in  the  State  of _ 

(The  "year"  as  hereinafter  used  means  the  calendar  year  or  fiscal  year  as  the  case  may  be.) 

1.  Total  amount  of  paid-up  capital  stock  outstanding  at  close  of  the  year,  or  if  no  capital  stock,  the 

capital  employed  in  the  business  at  the  close  of  the  year '. „ _,     $.. 

•S.  Total  amount  of  bonded  and  other  indebtedness,  outstanding  at  close  of  year |_ 

.  3.  GEOSS  INCOME  .(see  Note  A,  and  instructions,  paragraphs  10, 17,  18,  19,  and  21)..- .„_..    $L_ 

DEDMCTIONS. 

,  4.  (a)  Total  amount  of  all  the  ordinary  and  necessary  expenses  paid  within 
the  year  in  the  maintenance  and  operation  of  the  business  and 
properties  of  the  corporation  EXCLUSIVE  or  INTEREST  PAYMENTS 

•  tseeNoteB).... ». _ 

(b)  All  rentals  or  other  payments  required  to  be  made  as  a  condition  to* 
the  continued  use  or_  possession  of  the  property  (see  paragraph  12 
on  reverse  of  this  form) _ $. _. 


6.  (a)  Total  amount  of  losses  sustained  during  the  year  not  compensated  by 

insurance  or  otherwise................  _____  ...........  .....  .  .......  -   $_.. 


(6)  Total  amount  of  depreciation  for  the  year 

ount  of  interest  accrued  and  pai 

of  bonded  and  other  indebtedness  not  exceeding  one-half  of  the  snm  of  its 
-bearing  indebtedness  and  its  paid-up  capital  Block  outstanding  at  the  close  of 
r;  or  if  no  capital  stock,  the  amount  of  interest  paid  within  the  year  on  an 


6.  (a)  Total  amount  of  interest  accrued  and  paid  within  the  year  on  an 
amount  of  bonded  and  other  indebtedness  not  exceeding  one-half  of  the  sum  of  its 
•  Interest-bean 

mo&c^toa»UiJ^&*tM^&atc^3riql&m»t*fal*1*» 
business  at  the  close  of  the  year .77:...'. .HI *- 

(6)  Total  amount  of  interest  received  upon  obligations  of  a  State  or  ' 
political  subdivision  thereof  and  upon  the  obligations  of  the  United 
States  or  its  possessions .„ IL. 

.  7.  .(a)  Total  taxes  paid  duringthe  year,  imposed  under  authority  of  the  United 

.States  or  any  State  or  Territory  thereof . ..:.    *. 

(Z>)  Foreign  taxes  paid ;., , ,..., ». 

TOTAL  DEDUCTIONS..^ 


8.' Net  income  on  which  tax  at  1  per  centum  is  calculated. , «. 

Note.— The  above  blank  spaces  for  figures  should  show  the  amount  of  each  respective  Item.    If  there  Is  nothing  to  return  as  to  any  item,  the  word  "none" 
must  be  written  in  such  blank  .JpaceL  

STATE  OP Cowntyof f  TO  WIT: 

, . ,  President,  and . .Treasurer,  of 

the : . — ,„,  a  corporation,  whose  return  of  annual  net  income  is  set  forth  aboVe,  being  severally 

duly  sworn,  each  for  himself,  deposes  and  says  that  the  foregoing  report  and  the  several  items  therein  set  forth  are,  to  his  best 
knowledge  and  belief  and  from  such  information  as  he  has  been  able  to  obtain,  true  and  correct  in  each  and  every  particular;  that 
'the  amount  of  gross  income  therein  set  forth  is  the  full  amount  of  gross  income,  without  any  deduction  whatsoever,  received  from 
all  sources  by  the  said  corporation  during  the  year  stated,  and  that  the  net  income  therein  set  forth  is  the  full  amount  upon 
which  the  tax  at  1  per  centum  is  to  be  calculated  and  assessed 

SWOKM  ASD  SUBSCEIBKD  to  before  me  this , ,_„ > 

day  of . ..,  191  President. 


consist  of  the  total  amount 


NOTTS  A. — The  gross  amount  of  income  received  during  the  year  from  all  sources  shall,  in  the  case  of  a  mercantile  corporation, 

•ascertained  through  inventory,  or  its  equivalent,  which  shows, the  difference  between  the  price  received  for  goods  sold  and  the  cost  of  goods  purchased  during  the 
year,  with  an  addition  of  a  charge  to  the  account  of  the  sum  of  the  inventory  at  beginning  of  the  year  and  a  credit  to  the  account  of  the  sum  of  the  inventory  at  the 
end  of  the  year.    To  this  amount  should  be  added  all  items  of  income  received  during  the  year  from  other  sources,  including  dividends  received  on  stock  of  other 
corporations,  joint-stock  companies,  and  associations,  whether  subject  to  this  tax  or  not  and  intc 
thereof,  and'  upon  the  obligations  of  the  United  States  Of  its  possessions.    In  determining  this  at 
lasses,  which  items  shall  be  taken  account  of  under  the  proper  heading  above  as  a  deduction. 

NCTB  B.— The  deductions  authorized  shall  include  all  'expense  items  under  the  various  heads  acknowledged  as  liabilities  by  the  corporation  making  the  return 
and  entered  on  its  books  during  the  year.  Amounts  of  income  expended  in  paying  dividend!  on  stock,  preferred  or  common,  or  in  making  permanent  improvements 
or  betterments,  etc.,  or  in  any  way  transferred  to  capital  account,  should  not  be  deducted  in  ascertaining  annual  net  income.  Interest  paid  on  mortgage  indebtedness 
on  real  estate  occupied  or  used  by  a  corporation  may  be  deducted  in  Item  4,  if  the  interest  is  paid  as  a  rental  or  franchise  charge,  payment  of  which  is  required 
to  be  made  as  a  condition  to  the  continued  use  and  possession  of  the  property:  The  amount  so  paid  and  included  in  It«n  4  should,  Wever,  be  separately  stated 
under  Item  4  (6).  (See  paragraph  .12  on  re verw  of  this  :Snn.)  «»-™» 


TO  BE  FILLED  IN  BY  COLLECTORS.  Form.  IO35.  TO  BE  FILLED  IN  BY  INTERNAL  REVENUE  BUREAU. 

li,tHa  Class       *~  THE  PEMLTV  for  f.llure  to  h»»e  this  Return  In 

th.  hentfaof  the  Coll.otor  of  Int.rn.l  Revenue       .„,„_„„,  ;,w  in, 

en  or  before  March  I.  or  within  6O  deys  after      Assessment  LIST ,  IVI 

District  of the  clo».  of  the  fiscal  year.  Is  a  sum  net  •*• 

eoedlnc  SIO.OCO. 

Date  received ,  191  s..  ia.tr.oti...  •.  »th.r  .id..)  Page Line 

UNITED  STATES  INTERNAL  REVENUE. 


RETURN  OF  ANNUAL  NET  INCOME. 

(S.ction  2,  Act  of  Cong  rex  >pprcv«d  Ootob.r  3,  1913.) 


MISCEILLANEIOUS    CORPORATIONS. 

RETURN  OF  NET  INCOME  received  during  the  \^"f"r\  year  ended „ 


the  principal  place  of  business  of  which  is  located  at : 

City  or  Town  of _ 'in  the  Stale  of _ „ 

(The  "year"  as  hereinafter  used  means  the  calendar  year  or  fiscal  year  ae  the  case  may  be.) 

1.  Total  amount  of  paid-up  capital  stock  outstanding  at  close  of  the  year,  or  if  no  capital  stock,  the 

capital  employed  in  the  business  at  the  close  of  the  year.... _;...     $.„ 

2.  Total  amoun.t  of  bonded  and  other  indebtedness  outstanding  at  close  of  year $... 


3.  GROSS  INCOME  (see  Note  A,,  and  instructions,  paragraphs  10,  17,  18,  and  19).... 

DEDUCTIONS. 

4.  (o)  Total  amount  of  all  the  ordinary  and  necessary  expenses  paid  within  the 

year  in  the  maintenance  and  operation  of  the  business  and  properties 
of  the  corporation,  EXCLUSIVE  OF  INTEREST  PAYMENTS.  (See  Note  B.)    «.... 
(6)  All  rentals  or  other  payments  required  to  be  made  as  a  condition  to 
the  continued  use  or  possession  of  the  property.     (See  paragraph  12 
on  reverse  of  this  form) $._ 

6.  (a)  Total  amount  of  losses  sustained  during  the  year  not  compensated  by 

insurance  or  otherwise $.— 


(6)  Total  amount  of  depreciation  for  the  year.  -(See paragraphs  13  and  14).    •_ 

6.  (o)  Total  amount  of  interest  accrued  and  paid  within  the  year  on  an 
amount  of  bonded  or  other  indebtedness  not  exceeding  one-half  of  the  earn  of  it* 
interest-bearing  indebtedness  and  its  paid-up  capital  stock  outstanding  at  the  close  of  the 
year,  or  if  no  capital  stock,  the  amount  of  interest  paid  within  the  year  on  an  amount 
of  its  indebtedness  not  exceeding  the  amount  of  capital  employed  in  the  business  at  the 

close  of  the  year $ . 

(6)  Total  amount  of  interest  received  upon  obligations  of  a  State  or 
political  subdivision  thereof,  and  upon  the  obligations  of  the  United 
States  or  its  possessions $ _ 

7    (o)  Total  taxes  paid  during  the  year  imposed  under  authority   of  the 

United  States  or  any  State  or  Territory  thereof $ 

(6)  Foreign  taxes  paid .. _     $ , 

TOTAL  DEDUCTIONS  ...  ..     *. 


8.  Net  income  on  which  tax  at  1  per  centum  is  calculated 


-  Nora.—  The  above  blank  spaces  for  figures  should  show  the  amount  of  each  respective  item.  •  If  there  is  nothing  to  return  a»  to  any  item,  the  word  "none  "must 
B%  written  m  such  blank  spaces. 

STATE  OP  ...................  ------  _  ..........  ______________  ,  County  of  ______________________________________________  ,  TO  WIT  r 

.....................  _________________________________  ........  _________  ,  President,  and  ________________  „  _________________________  ,  Treasurer,  of 

the  --------  ........  _  .................................  _______  ,  a  corporation,  whos&  return  of  annual  net  income  is  set  forth  above,  being  severally 

duly  sworn,  each  for  himself,  deposes  and  says  that  the  foregoing  report  and  the  several  items  therein  set  forth  are,  to  his  best 
knowledge  and  belief  and  from  such  information  as  he  has  been  able  to  obtain,  true  and  correct  in  each  and  every  particular;  that 
the  amount  of  gross  income  therein  set  forth  is  the  full  amount  of  gross  income,  without  any  deduction  whatsoever,  received  from 

net  income  therein  set  fprth  is  the  full  amount  upon  which 


e  amount  o  gross  income  therein  set  forth  is  the  full  amount  of  gros 
all  sources  by  the  said  corporation  during  the  year  stated,  and  that  the 
the  tax  at  1  per  centum  is  to  be  calculated  and  assessed. 


SWOBN  AND  SUBSCRIBED  to  before  me  this 
day  of  ---------------------------  ,  191 


(Official  capacity.) 


Nor*  A.— Gross  income  shall  consist  of  the  total  of  the  gross  revenues  derived  from  the  operation  and  management  of  its  business  and  properties,  together  with  all 
amounts  of  income  from  other  sources,  including  dividends  received  on  stock  of  other  organizations,  whether  subject  to  this  tax  or  not,  and  interest  received  upon 
obligations  of  a  State  or  political  subdivision,  thereof,  and  upon  the  obligations  of  the  United  States  or  its  poeaeseioiis,  a*  ihovn  by  entries  upon  its  hooks  during  the 
year  for  which  the  return  it  toad*. 

,  -Mora  B.— The  deductions  authorized  'shall  include  all  expense  items  under  the  various  heads  acknowledged  al  liabilities  by  the  corporation  making  the  return 
and  entered  on  its  books  during  the  year.  Amounts  of  income  expended  in  paying  dividend!  on  «<oci,  preferred  or  common,  or  in  making  permanent  improvements 
or  betterment!,  etc.,  or  in  any  way  transferred  to  capital  account,  are  not  proper  deductions  in  ascertaining  annvat  net  income.  Interest  paid  on  mortgage  indebtedness 
on  real  e»Uta  occupied  of  used  by  a  corporation  may  be  deducted  in  Item  4,  il  the  interest  is  paid,  as  a  rental  or  franchise  charas,  pavment«f  which  is  re 
to  ^e  mads  as  a  condition,  to  the  continued  u»  and  possession  of  the  property.  The  amount  so  paid  tod  included  ia  JtomTiLould  be  ,Uted  separately 
Item,4(»).  (See  paragraph  12  on  riyerse  of  .this  form.) 


INSTRUCTIONS  FOR  1031  TO   1035   (INCLUSIVE) 
ANNUAL  RETURN 

Banks  and  Other  Financial  Institutions  (1031), 
Public  Service  Corporations  (1032) 
Manufacturing   Corporations   (1033) 
Mercantile  Corporations   (1034) 
Miscellaneous  Corporations  (1035) 

SPECIAL  NOTICE.— This  form,  properly  filled  out  and  executed, 
must  be  in  the  hands  of  the  Collector  of  Internal  Revenue  for  the  district 
in  which  is  located  the  principal  business  office  of  the  corporation  making 
the  return,  on  or  before  March  1,  in  case  the  return  is  based  on  the 
calendar  year,  or  within  60  days  after  the  expiration  of  the  fiscal  year 
in  case  the  return  is  made  on  that  basis. 

For  failure  to  comply  with  this  provision  of  the  law,  the  amount 
of  the  assessment  is  increased  50  per  cent  and  liability  to  a  specific 
penalty  not  exceeding  $10,000  is  incurred. 

1.  This  return  of  annual  net  income  should  be  filed  with  the  Collector 
.of  Internal  Revenue  of  the  district  in  which  the  corporation  has  its  principal 
place  of  business. 

2.  The  principal  place  of  business  as  used  in  the  act  and  in  these  regula- 
tions is  held  to  mean  the  place  in  which  the  books  of  account  and  other  data 
to  be  used  in  preparing  the  return  of  annual  net  income  are  ordinarily  kept. 

3.  Returns  must  be  verified  by  two  officers  of  the  corporation;  that  is, 
by  two  individuals,  namely,  the  president,   vice-president,  or  other  principal 
officer,  and  treasurer  or  assistant  treasurer,  or  chief  financial  officer. 

4.  The  affidavit  of  verification  must  be  made  before  a  notary  public  or 
some  other  officer  qualified  to  administer  oaths,  and  the  seal  of  the  attesting 
officer,  if  such  officer  is  required  by  law  to  have  a  seal,  must  be  impressed 
on  the  return  in  the  space  reserved  for  that  purpose. 

5.  The  return  must  be  true  and  accurate  in  every  respect  and  must  dis- 
close all  the  income  arising,  accruing,  or  received   from  all  sources  during 
the  year  for  which  the  return  is  made. 

6.  If  the  return  is  based  upon  the  calendar  year  it  should  be  filed  with 
the  collector  on  or  before  the  first  day  of  March  next  succeeding  such  cal- 
endar year.     If  it  is  made  on  the  basis  of  business  transacted  during  a  fiscal 
year,   duly  designated  in   accordance  with   the   law   and  the   regulations,  the 
return   must   be   filed  with  the   collector   on  or   before  the   last  day   of   the 
6o-day  period  next  following  the  date  designated  as  the  close  of  the  fiscal 
year. 

7.  In   case  of   sickness  or   absence  of   an   officer   required  to   verify  the 
return,   the   collector   of   the    district   is   authorized   to   extend   the   time    for 
filing  such  return  not  exceeding  30  days  from  the  date  when  such  return  is 
otherwise  due.     Application  for  such  extension  should  be  made  prior  to  the 
date  when  the  return  is  due,  or  within  the  thirty-day  period  for  which  such 
extension  is  desired  and  can  be  granted. 

8.  Item  No.   1  of  the  schedule  on  the  obverse  of  this  form  should  not 
include  unissued  or  treasury  stock,  but  only  such  stock  as  has  actually,  been 
issued   and   for  which  payment  has  been   received;   or,   in  case  no   stock  is 
issued,    there    should    be    reported    under    this    item    the    amount    of    capital 
actually  employed  in  the  business  and  property  of  the  corporation.     In  cases 
wherein  the  capital  stock  is   issued  payable  in  installments  or  upon  assess- 
ment, only  so  much  of  the  capital  as  has  been  actually  paid  in  upon  such 
installments  or  assessments  should  be  reported  under  this  item. 

9.  Item   No.   2   should   include   all   interest-bearing   indebtedness    for  the 
payment   of   which   the   corporation    or   its   property   is   bound.     In   case   of 
banking  corporations   and   like  financial  institutions,  deposits  "should   not  be 
reported  as  indebtedness  under  this  head. 

90 


Instructions  for   1031-1035  cont'd. 

10.  Item   No.   3  of  the  return   form    (gross   income)    should  include   all 
income   derived    from   the  operations  and  management   of  the  business  and 
properties,  together  with  all  actual  increases  in  value  by  appraisement,  adjust- 
ment, or  otherwise  in  the  value  of  the  assets  'which  have  been  taken  up  on 
the  books  as  income  or  credited  to  profit  and  loss  during  the  year.     In  the 
case  of  a  corporation  organized,  authorized,  or  existing  under  the  laws  of 
any  foreign  country,  the  gross  income  to  be  returned  is  the  gross  amount 
of   its   income   for  the  year   resulting   from  business  transacted  and  capital 
invested  within  the  United  States. 

11.  Item  No.  4  (a)   should  include  the  total  amount  of  all  ordinary  and 
necessary  expenses  paid  out  of  earnings  in  the  maintenance  and  operation 
of  the  business  and  properties  of  the  corporation,  etc.,  exclusive  of  interest 
and  other  payments  to  be  listed  under  their  respective  heads  on  the  return 
forms. 

12.  Item  No.  4  (fc)  should  include  all  rentals  or  other  payments  required 
to  be  made  as  a  condition  to  the  continued  use  or  possession  of  the  property. 
In  cases  where  interest  on  a  mortgage  on  property  occupied  or  used  by  the 
corporation  is  paid  as  a  condition  to  its  possession  and  use,  thus  becoming  in 
the  nature  of  a  rental  charge,  such  interest  charge  may  be  included  in  the 
deduction  under  this  item.     Mortgage  indebtedness,   assumed  or  unassumed, 
on  property  to  which  the  corporation  has  taken  or  is  taking  title,  or  in  which 
it  has  an  equity,  or  in  the  acquirement  of  which  the  mortgage  was  considered 
a  part  of  the  purchase  price,  is  held  to  be  a   debt  of  the  corporation  and 
interest  paid  on  such  indebtedness  will  be  deductible  only  under  Item  6  of 
the  return. 

13.  The  amount  claimed  under  Item  No.  5   (6)    for  depreciation  should 
be  such  an  amount  as  measures  the  loss  which  the  corporation  actually  sus- 
tains during  the  year  in  the  value  of  buildings,  machinery,  and  such  other 
property  as  is  subject  to  depreciation  on  account  of  wear  and  tear,  exhaus- 
tion, or  obsolescence.     The  amount  taken  credit  for  on  this  account  in  order 
to  be  allowable  should  be  so  entered  on  the  books  as  to  constitute  a  liability 
against  the  assets  of  the  corporation.     Th'e  amount  claimed  under  this  item 
should  not  cover  losses  in  the  value  of  stocks  and  bonds.     Decrease  in  the 
book  value  of  securities  owned,  so  far  as  such  decrease  represents  a  decline 
in  the  actual  value  of  such  securities,  should  be  deducted  under  Item  5   (a) 
of  the  return. 

14.  Where  depreciation  of  physical  property  is  made  good  by  renewals, 
replacements,   repairs,  etc.,  and  the  expense  of  such  renewals,  replacements, 
repairs,   etc.,   is   charged   to   the   general   expense   account,   no   deduction   for 
depreciation  can  be  made  in  the  return  of  annual  net  income.  When  a  de- 
preciation reserve  is  set  up,  all  renewals  and 'replacements  must  be  charged 
to  such  reserve  and  the  addition  to  this  reserve  each  year  must  be  a  fair 
measure  of  the  loss  which  the  corporation  sustains  by  reason  of  the  depre- 
ciation of  its  property. 

15.  The  amount  of  interest  deductible  is  the  amount  of  interest  accrued 
and   paid   within  the   year   on   bonded   or   other   indebtedness   not  exceeding 
one-half   of  the   sum   of   inter-bearing  indebtedness   and  the   paid-up  capital 
stock  outstanding  at  the  close  of  the  year,  or  if  no  capital  stock,  the  amount 
of  interest  paid  within  the  year  on  an  amount  of  indebtedness  not  exceeding 
the  amount  of  capital  employed  in  the  business  at  the  close  of  the  year ;  or 
in  case  of  a  corporation,  joint  stock  company  or  association,  or  insurance 
company  organized  under   the   laws   of   a   foreign   country,   interest  so   paid 
on  its  bonded  or  other  indebtedness  to  an  amount  of  such  bonded  or  other 
indebtedness  not  exceeding-  the  proportion  of  its  paid-up  capital  stock  out- 
standing  at  the  close   of   the  year,   or   if   no   capital   stock,   the   amount   of 
capital  employed  in   the  business  at  the  close  of  the  year,  which  the  gross 
amount   of   its  income   for   the   year  from   business    transacted   and   capital 
invested  within  the   United  States  bears  to  the  gross  amount  of  its  income 
derived  from  all  sources  within  and  without  the  United  States.    All  interest 
deductions  must  be  claimed  under  Item  6  on  the  return  form. 

16.  Dividends  declared  or  paid 'are  not  deductible  from  gross  income. 

91 


Instructions  for   1031-1035  cont'd. 

17.  Dividends  received  upon  the  stock  of  other  corporations  must  be  in- 
cluded in  gross  income  and  are  not  deductible  therefrom  in  the  ascertainment 
of  the  net  income  on  which  the  tax  is  computed. 

18.  Interest  received  upon  the  obligations  of  a  State  or  any  political  sub- 
division thereof,  and  upon  the  obligations  of  the  United  States  or  its  posses- 
sions, should  be  included  in  gross  income,  as  well  as  all  other  interest  due 
and  accrued  during  the  period  for  which  return  is  made. 

19.  Accrued  interest  is  considered  to  be  interest  due  and  payable,  except 
in  the  cases  of  banking  or  other  similar  institutions  which  close  their  accounts 
on  the  basis  of  the  interest  earned.    In  all  cases  the  accrued  interest  shall  be 
reported  on  the  basis  on  which  the  books  are  closed. 

20.  Taxes  deductible  in  the  return  are  such  taxes,  actually  paid  within 
the  year,  as  are  imposed  by  authority  of  the  United  States  or  of  any  State  or 
Territory  thereof,  or  by  the  government  of  any  foreign  country,  not  includ- 
ing taxes  paid  by  a  corporation,  pursuant  to  guaranty,  on  its  bonds  or  the  in- 
come therefrom  and  not  including  those  taxes  assessed  against  local  benefits. 
A  reserve  for  taxes,  as  such,  is  not  deductible. 

21.  The  gross  income  of  mercantile  corporations  should  be  ascertained  in 
the  following  manner :  From  the  sum  of  the  total  sales  during  the  year  plus 
the  sum  of  the  inventory  at  the  end  of  the  year,  deduct  the  sum  of  the  in- 
ventory at  the  beginning  of  the  year  plus  the  cost  of  the  goods  and  materials 
purchased  during  the  year;  to  this  difference  add  the  income  received  from 
any  other  source  and  the  result  will  be  the  gross  income  to  be  reported  under 
Item  No.  3  of  the  return. 

""22.  Gross  income  in  the  case  of  a  manufacturing  corporation  shall  include 
the  total  receipts  from  the  sale  of  all  manufactured  goods  sold  during  the 
year  plus  any  increase  in  tire  inventoried  value  ascertained  through  an  ac- 
counting of  the  finished  and  unfinished  product,  raw  material,  etc.,  on  hand  at 
the  close  of  the  year. 

23.  To  the  income  thus  ascertained  there  should  be  added  the  income  aris- 
ing, accruing,, or  received  from  any  and  all  other  sources,  the  aggregate  thus 
ascertained  to  be  the  gross  income  to  be  returned  under  Item  No.  3  of  the 
return  form.  Since  the  gross  income  thus  ascertained  represents  the  total 
receipts  as  well  as  the  inventoried  value  of  finished  and  unfinished  products, 
raw  material,  etc.,  the  corporation  will  include  in  its  deduction  under  Item 
No.  4  all  expenditures  for  material,  labor,  fuel,  and  other  items  going  to  make 
up  the  cost  of  the  goods  sold  or  inventoried  at  the  end  of  the  year. 


92 


UNITED   STATES   INTERNAL  REVENUE. 


MONTHLY  LIST  RETURN  OF  AMOUNT  OF  NORMAL  INCOME  TAX  WITHHELD  AT  THE  SOURCE. 

Filed  by .._. 

To  be  made  in  duplicate  to  the  Collector  of  Internal  Revenue  for  the  District  in  which  the  withholding  agent  is  located,  on  or  before,  the 
20th  day  of  each  month,  showing  the  names  and  addresses  of  persona  who  have  received  payments  of  interest  upon  bonds  and  mortgages,  or  deeds 
•of  trust,  or  other  similar  obligations  of  corporations,  joint-stock  companies  or  associations,  and  insurance  companies,  on  which  the  normal  tax 
of  1  per  cent  has  been  deducted  and  withheld  during  the  preceding  month. 


,  the  duly 


authorized  withholding  agent  of 


, located  at . 


,  do  solemnly  swear  (or  affirm)  that  the  following  ia  a  true  and  complete  return  of  all 

coupon  and  interest  payments  as  above  described,  made  by  said  organization  and  from  which  the  normal  tax  of  1  per  cent  was  deducted  and 

withheld,  at  the  time  of  payment,  or  for  which  it  is  liable  as  withholding  agent,  during  the  month  of . ,  191 

on  the __.._....„-... Bonds  (or  other  similar  obligations)  of  the _...._.-_i~5_j , 

and  there  are  herewith  inclosed  all  certificates  of  ownership  which  were  presented  with  said  coupons  or  orders  for  registered  interest  covering 


.- 

•turn 

ADDBIS3  ID  JTU. 

— 

SF 

*-^«Mr 

*BK£- 



~-  

$  

$  







-  





=  -  

..................... 







-  

$  

$  

$ 

Amount  of  tax  remitted  herewith  (if 

my)  to  Collector  

$  

To  
(MtaMr. 
District  of  

Sworn  to  and  subscribed  before  me 
day  of  ,  19 

his        Signed 

(£553 

ss 

I.  .hit.  Mtaf.) 

tevenue  with  who 

n  the  list  Is  fi 

ed,  the  amount  of  t 

ai  withheld 

daring  the  month  for  which  the  list  ia  made. 

Not*  B.— All  substitute  certificates  of  collating  agents,  authorize.!  by  regulations,  that  are  received  by  debtors  or  withholding  agents  will  be  considered  the  same  as  certificates 
of  owners,  and  In  entering  game  in  making  Monthly  List  Returns,  debtors  or  withholding  agents  will  enter  the  nairie,  address,  afld  the  number  of  the  substitute,  certificate  of  the 


93 


UNITED    STATES    INTERNAL    REVENUE. 


ANNUAL  LIST  RETURN  OF  AMOUNT  OF  NORMAL  INCOME  TAX  WITHHELD  AT  THE  SOURCE 

ON  SAURIES.  WAGES,  RENT,  INTEREST,  08  OTHEE  FIXED  AND  DETERH1NABLE  ANNUAL  CAINS,  PROFITS,  AND  INCOKE  EXCEEDING  J3.000  FOR  THE  TAXABLE  YEAR. 


Filed  by.... 


\  capital  slock  or  net  earnings  of  corporations,  joint- 
d  from  interest  upon  bonds  or  mortgages,  or  deeds  of  trusts,  or  other  similar 
,  or  from  interest  upon  bonds,  mortgages,  or  dividends  of  foreign  corporations. 


..,  for  the  year  191 


To  be  made  in  duplicate  to  the  Collector  of  Internal  Revenue  for  the  District  in  which  the  debtor  or  his  duly  appointed  withholding  agent, 
as  the  case  may  be,  is  located,  on  or  before  the  first  day  of  March,  showing  the  names  and  addresses  of  persons  who  have  received  salaries, 
wages,  rent,  etc.,  as  above  described,  in  excess  of  »3,000,  on  which  the  normal  tax  of  1  per  cent  has  beau  deducted  and  withheld  during<'tfhe 
preceding  calendar  year 

I  (we), „ _ _•__ __ ,  of 

the iur'ni/uu °f -iii— "iii;-  -- .located  at , 

do  solemnly  swear  (or  affirm)  that  the  following  is  a  true  and  complete  return  of  all  salaries,  wages,  rent,  and  other  fixed  and  determinate 
annual  gains,  profits,  and  income  in  excess  of  $3,000  as  above  described,  which  were  paid  (or  were  payable)  to  each  of  the  persons  listed  herein, 
and  on  which  the  normal  tax  of  1  par  cent  was  deducted  and  withheld  during  the  year  stated,  and  there  are  herewith  inclosed  all  certificates 
claiming  exemptions  and  deductions  with  respect  to  said  income. 


uan 

ADDKBU  IN  FULL. 

•KggST 

_„**. 

IE? 

""."til?*" 

*"»™iJ" 

$  

$  

$  

$  

Totals  for  calendar 'year , 

Amount  of  tax  remitted  herewith  (if  any)  to  Collector. 


Bistrict  of. 


3 worn  to  and  subscribed  before  me  this 


NOTE  A.— Withholding  agent*  may,  if  they  «o  deeire,  pay  a 
during  the  yew  for  which  the  lilt  ia  made.  ' 


the  time  thii  liat  in  tied,  to  the  Collector  of  Internal  Revenue  with  whom  the  list  if  filed,  t 


94 


UNITED    STATES    INTERNAL    REVENUE. 

MONTHLY  LIST  RETURN  OF  AMOUNT  OF  NORMAL  INCOME  TAX  WITHHELD  ON  FOREIGN  INCOME 

BY  LICENSED  BANKS  OR  COLLECTING  AGENCIES 


Filed  by 


_    License  JVo 


To  be  made  ia  duplicate  to  the  Collector  of  Internal  Revenue  for  the  District  in  which  the  licensee  is  located,  on  or  twfor^the  20th  day  of  each 
month,  showing  the  names  aud  addresses  of  persons  who  have  received  payments  from  coupons,  checks,  or  bills  of  exchange  representing  interest 
upon  bonds  issued  in.foreign  countries  and  upon  foreign  mortgages  or  like  obligations  (not  payable  in.  the  United  States),  or  dividends  upon  the 
stock  or  interest  upon  the  obligations  of  foreign  corporations,  associations,  or  insurance  companies  engaged  in  business  in  foreign  countries,  on 
which  the  normal  tax  of  1  per  cent  has  been  deducted  and  withheld  during  the  preceding  month. 


I  (we), .„ ,  of .^ ..  .. ...„. 

the of  the  above-named  bank.or  collecting  agency  located  at __  

do  solemnly  swear  (or  affirm)  that  the  following  is  a  true  and  complete  return  of  all  payments  as  above  described,  made  by  said  bank  or  collecting 
agency,  and  from  which  the  normal  tax  of  1  per  cent  was  deducted  and  withheld  at  the  time  of  payment,  or  for' which  it  is  liable  as  withholding 

agent,  during  the  month  of  _ _ _.,.  191    ,  and  there  are  herewith  inclosed  all  certificates  claiming  exemption  which  were 

presented  with  said  coupons,  checks,  etc. 


Totals  for  month ....    $ 

at  of  tax  remitted  herewith  (if  any)  to  Collector ,,.. 


District  of 


Sworn  to  and  subscribed  before  me  this 
, day  of _ ,  191 


Signed: 


, 
a  made. 


if  they  BO  desire  par  at  the  t 


i  list  is  Bled,  to  the  Collector  of  Internal  Revenue  with  whom  the  I 


NOT.  A.— Withholding  agenta  m 
during  the  month  (or  which  the  list  ia  u 

Nor*  B.—  All  substitute  certificates  of  collecting  agents,  authorized  by  regulations,  that  are  received  by  debtors  or  withholding  agent! 

\r 

collecting  agent  in  lieu  of  the  name  and  addrers  of  the  owner  of  the  bonds. 

Nor«  O. -Enter  "Int  ou  Bonds,"  "Int.  on  Mort;?.,"  "  Dividends"  etc.,  as  the  case  may  be. 


!  filed,  the  amount  of  tax  withheld 


'ill  be  considered  the  aamo  as 


95 


Form  1O44. 


UNITED  STATES  INTERNAL  REVENUE. 


MONTHLY  LIST  RETURN  OF  AMOUNT  OF  NORMAL  INCOME  TAX  WITHHELD  BY  FIRST  BANK  OR  COLLECTING  AGENCY 

RECEIVING  COUPONS  AND  INTEREST.  ORDERS  NOT  ACCOMPANIED  BY  CERTIFICATES  OF  OWNERS. 
Filed  by _ 

To  be  made  in  duplicate  to  the  Collector  of  Internal  Revenue  for  the  District  in  which  the  collecting  agency  is  located,  on  or  before  the  20th 
day  of  each  month,  showing  the  names  and  addresses  of  persona  who  have  received  payments  of  interest  upon  bonds  and  mortgages,  or  deeds  of  trust, 
or  other  similar  obligations  of  corporations,  joint-stock  companies  or  associations,  and  insurance  companies,  on  which  the  normal  tax  of  1  per  cent 
has  been  deducted  and  withheld  during  the  preceding  month,  the  coupon  and  interest  orders  for  said  payments  having  been  presented  without 
certificates  of  owners. 

I  (we) , ,  of   ^  .      ...|t    

the  ........ ^ of „ ..._„..„.... ,  located  fit    _.. 

do  solemnly  swear  (or  affirm)  that  the  following  is  a  true  and  complete  return  of  all  coupon  and  interest  orders  purchased  or  accepted  for  collection 

as  above  described  during  the  month  of ,  191     ,  and  the  said  bank  or  collecting  agency,  having  acknowledged 

its  responsibility  of  withholding  therefrom  the  normal  tax  of  1  per  cent,  has  deducted  and  withheld  the  tax  as  listed  below,  in  accordance  with  the 
regulations  of  the  Treasury  Department. 


MAUE. 

««-»,^ 

VSE.'tfSl" 

AMiywrof  T*r 

Totals  for  month 

-  —  -  

$  

$  ,... 
$  

$..:.  

Amount  of  tax  remitted  herewith  (if  a 

To  Sworn  to  and  subscribed  before  me  this        Signed: 

Collector. 

District  of  'lay  of  _...,  101 

NOTK  A<—  withholding  ag«nto  may,  if  they  K  rtetire,  pay  •'  th«  tim«  tw§  ltat  "  filc<1'  lo  the  Collector  of  Internal  Revenue  with  whom  the  list  a  filed,  the  amount  of  tax  withheld 
during  the  month  for  which  the  li<tia  made.                                                                                                                                                                                                          J-TJTJ 

96 


PREFACE. 


The  accompanying  regulations  embrace  the  various  ad- 
ministrative features  of  the  law  (sec.  2,  act  of  Oct.  3, 
1913)  imposing  a  tax  on  incomes.  They  contain  instruc- 
tions relative  to  the  preparation  of  returns,  etc.,  and  are 
designed  to  assist  both  the  taxpayer  and  the  officers  charged 
with  its  enforcement  in  complying  with  the  requirements 
of  this  law. 


Liberal  construction  of  the  law  has  been  given  that  those 
charged  with  withholding  the  tax  at  the  source  may  not 
do  so  unnecessarily.  Withholding  agents  may  forward  evi- 
dences of  non-liability  to  payment,  when  such  evidences  are 
received  by  them,-  to  collector  for  the  district  in  lieu  of  the 
tax.  This  will  relieve  them  of  the  necessity  of  withholding 
such  tax. 


The  regulations  are  arranged  according  to  general  sub- 
jects, as  follows: 

Part  1.  Individual  income  returns  and  collections. 

Part  2.  Collections  at  the  source. 

A.  Bonds,  mortgages,  deeds  of  trust,  etc. 

B.  Bonds,  mortgages,  deeds  of  trust,  etc.,  by  first 

bank   or   collection   agency   where   certificates 
of  owners  are  not  filed. 

C.  Bonds,    mortgages,    dividends,    etc.,    of    foreign 

corporations. 

D.  Salaries,  wages,  rent,  etc. 

E.  Fiduciaries. 


Part  3.  Relative   to   corporations,   joint-stock   companies 
or  associations,  and  insurance  companies. 


Part  4.  Assessment  and  collection. 

All  forms  of  certificates  herein  provided  shall  be  8  inches 
wide  and  3^  inches  from  top  to  bottom,  and  printed  on 
paper  of  substantial  weight  and  texture. 


97 


REGULATIONS. 


Regulations  concerning  the  tax  imposed  by  Section  2,  Act  of 
October  3,  1913,  on  net  income  of  individuals,  Corporations, 
Joint-stock  Companies,  Associations,  and  Insurance  Com- 
panies. 


TREASURY  DEPARTMENT, 
OFFICE  OF  COMMISSIONER  OF  INTERNAL  REVENUE, 

Washington,  D.  C.,  January  5,  1914. 

PART  1. 
INDIVIDUAL  INCOME  RETURNS  AND  COLLECTIONS. 

ARTICLE  1.    Section  2  of  the  above-named  act  imposes  a  Persons  taxable. 
tax  of  1  per  centum  (designated  as  the  normal  tax)  on  net 
incomes  arising  or  accruing  from  ALL  SOURCES  during  the 
preceding  calendar  year  to — 

(a)  Every  citizen  of  the  United  States,  whether  residing 
at  home  or  abroad;  and 

(b)  Every  person  residing  in  the  United  States,  though 
not  a  citizen  thereof;  and 

(c)  From  all  property  owned  and  from  every  business, 
trade,  or  profession  carried  on  in  the  United  States,  by  a 
person  residing  elsewhere. 

ART.  2.    Said  section  also  imposes  an  additional  tax  on      Additional    «r 
all  net  incomes  of  individuals  exceeding  $20,000,  as  follows :  super  *•*• 

1  per  cent  on  incomes  exceeding  $20,000  and  not  exceed- 
ing $50,000. 

2  per  cent  on  incomes  exceeding  $50,000  and  not  exceed- 
ing $75,000. 

3  per  cent  on  incomes  exceeding  $75,000  and  not  exceed- 
ing $100,000. 

4  per  cent  on  incomes  exceeding  $100,000  and  not  exceed- 
ing $250,000. 

5  per  cent  on  incomes  exceeding  $250,000  and  not  exceed- 
ing $500,000. 

6  per    cent   on   incomes    exceeding  $500,000. 

ART.  3.   The  NET  INCOME  shall  consist  of  the  total  gains,      Net 
profits,  and  income  derived  from  all  sources  (designated  as  d 

99 


gross  income)  less  deductions  numbered  first  to  sixth, 
inclusive,  specifically  enumerated  in  paragraph  B  of  the 
act.  (See  article  6.) 

com-       ^-n  computing  the  taxable  income  for  the  purposes  of  the 
puted.  normal  tax  there  shall  be  deducted  from  the  net  income  as 

above  ascertained: 

(a)  The  amount  included  in  the  gross  income  received 
as  dividends  upon  the  stock  or  from  the  net  earnings  of  any 
corporation,  joint-stock  company,  association,  or  insurance 
company  which  is  taxable  upon  its  net  income  ; 

(b)  The  amount  of  income  the  tax  upon  which  has  been 
paid  or  withheld  for  payment  at  the  source  ;  and 

(c)  The  specific  exemption  of  $3,000  or  $4,000,  as  the 
case  may  be,  except  in  the  case  of  nonresident  aliens. 

wSt  It  inSSdes'       ART.  4.   GROSS  INCOME  includes  all  gains,  profits,  and  in- 
come derived  from  — 

(a)  Salaries,  wages,  or  compensation   for  personal   ser- 
vice of  whatever  kind  and  in  whatever  form  paid. 

(b)  Professions,   vocations,   business    (including  income 
from  copartnerships),  trade,  commerce,  or  sales  or  dealings 
in  property,  growing  out  of  the  ownership  or  use  of  or 
interest  in,  real  or  personal  property. 

(c)  Interest,  rent,  dividends,  securities,  or  transaction  of 
any  lawful  business  carried  on  for  gain  or  profit.     (See  art. 
67  as  to  interest  on  deposits  and  certificates  of  deposit.) 

(d)  Gains  or  profits  and  income  derived  from  any  source 
whatever,  including  the  income  from,  but  not  the  value  of, 
property  acquired  by  gift,  bequest,  devise  or  descent. 

The  foregoing  is  held  to  include  all  income,  gains,  and 
profits  arising  or  accruing  from  all  sources  whatever  in  the 
calendar  year  for  which  the  return  is  made,  except  as  here- 
inafter specifically  stated. 


fcomc°taxatfoiiupt       ^RT>  ^'    ^e  following  items  should  not  be  included  as 
gross  income:  * 

(a)  Value  of  property  acquired  by  gift,  bequest,  devise, 
or  descent  during  the  year. 

(b)  Proceeds  of   life   insurance  policies  paid   upon  the 
death  of  the  person  insured  to  beneficiaries,  or  payments 
made  by  or  credited  to  the  insured,  on  life  insurance,  en- 
dowment, or  annuity  contracts,  upon  the  return  thereof  to 
the  insured  at  the  maturity  of  the  term  mentioned  in  the 
contract,  but  this  shall  not  be  construed  to  mean  that  interest 

100 


payments  to  beneficiaries   from  insurance  companies   shall 
not  be  included  as  income. 

(c)  Income  derived  from  interest  upon  the  obligations  of 
a  State  or  any  political  subdivision  thereof  and  upon  the 
'obligations  of  the  United  States  or  its  possessions. 

(d)  The  compensation  of  the  President  of  the  United 
States  in  office  at  the  time  of  the  passage  of  the  act  of 
October  3,  1913,  during  the  term  for  which  he  was  elected, 
and  the  judges  of  the  Supreme  and  inferior  courts  of  the 
United  States  in  office  at  the  time  of  the  passage  of  the  act 
of  October  3,  1913; 

(e)  The  compensation  of  all  officers  and  employees  of  a 
State  or  any  political  subdivision  thereof,  including  public- 
school  teachers,  etc.    When  such  State  officers  or  employees 
are  compensated  by  the  United  States,  they  must  include 
such  income  as  taxable. 

ART.  6.  Deductions  and  exemptions  allowed  in  computing 
taxable  income  for  the  purpose  of  the  normal  tax. 

Under  paragraph  B  the  following  items  are  to  be  deducted  ,  Deductions  ai- 

f  lowed  under  par- 

from  the  GROSS  INCOME:  agraph  B. 

1.  The  amount  of  necessary  expenses  actually  paid  for 
carrying  on  business,  but  not  including  business  expenses 
of  partnerships  and  not  including  personal,  living,  or  family 
expenses. 

2.  All  interest  paid  within  the  year  on  personal  indebted- 
ness of  the  taxpayer  incurred  in  the  conduct  of  business. 

3.  All  National,  State,  county,  school,  and  municipal  taxes 
paid  within  the  year  (not  including  those  assessed  against 
local  benefits). 

4.  Losses  actually  sustained  during  the  year  incurred  in 
trade  or  arising  from  fires,  storms,  or  shipwreck  and  not 
compensated  for  by  insurance  or  otherwise. 

5.  Debts  due  to  the  taxpayer  which  have  been  actually 
ascertained  to  be  worthless  and  charged  off  within  the  year. 

6.  Amount  representing  a  reasonable  allowance  for  the 
exhaustion,  wear,  and  tear  of  property  arising  out  of  its  use 
or  employment  in  the  business,  not  to  exceed,  in  the  case 
of  mines,  5  per  cent  of  the  gross  value  at  the  mine  of  the 
output   for  the  year   for  which  the  computation,  is  made, 
but  not  including  the  expense  of  restoring  property  or  mak- 
ing good  the  exhaustion  \thereof,  for  which  an  allowance  is 
or  has  been  made,  nor  for  any  amount  paid  for  new  build- 
ings,   permanent   improvements,   or   betterments,   made   to 
increase  the  value  of  any  property  or  estate. 

101 


"Gross  value  The  term  "gross  value  at  the  mine"  as  used  in  paragraphs  B  and  G  of. 
at  the  mine"  de-  section  2  of  the  act  of  October  3,  1913?  prescribing  a  limit  to  the  amount 
fined.  which  may  be  deducted  in  the  return  of  individuals  and  corporations  as  de- 

preciation in  the  case  of  mines,  is  held  to  mean  the  bona  fide  market  value  of 
ore,  coal,  crude  oil,  and  gas  at  the  mine  or  well,  where  such  value  is  estab- 
lished by  actual  sales  at  the  mine  or  well  ;  and  in  case  the  market  value  of 
the  product  of  the  mine  or  well  is  established  at  some  other  place  than 
at  the  mine  or  well,  or  on  the  basis  of  the  bullion  or  metallic  value  of  the 
ore,  then  the  gross  value  at  the  mine  is  held  to  be  the  value  of  the  ore, 
coal,  oil,  or  gas  sold,  or  of  the  metal  produced,  less  transportation,  reduc- 
tion, and  smelting  charges. 

7.  The   amount    included   in   gross   income    received   as 
dividends  upon  the  stock,  or  upon  the  net  earnings,  of  any 
corporation,  joint-stock  company,  association,  or  insurance 
company  which  is  taxable  upon  its  net  income. 

8.  The  amount  of  income,  the  normal  tax  upon  which  has 
been  paid  or  withheld  for  payment  at  the  source  of  income. 

Gifts  or  dona-       None  of  the  above  items  of  deduction  shall  include  money 

tlons   made   dur-  ,  .  ,.          ,  ,.  j        r    n  T^J          ^- 

ing  the  year  not  or  other  items  of  value  disposed  of  by  gift,  donation,  or 
to  be  deducted.  endowment. 


agraphc. 


Under  paragraph  C  the  personal  exemption  of  $3,000  or 
$4,000,  as  the  case  may  be,  is  to  be  deducted  from  the  net 
income  except  in  the  cases  of  nonresident  aliens.  (Ser 
arts.  7,  9,  and  10.) 


onTtheCSSPndw  ART-  ^'  The  act  provides  that  the  said  normal  tax  shal 
7i9u  except  for  be  computed  on  the  remainder  of  said  net  income  accruing 
during  each  preceding  calendar  year,  and  that  for  the  year 
ended  December  31,  1913,  said  tax  shall  be  computed  on 
the  net  income  accruing  from  March  1  to  December  31, 
both  dates  inclusive,  after  deducting  five-sixths  only  of  the 
specific  exemptions  and  deductions  authorized.  A  specific 
exemption,  therefore,  of  $2,500  or  $3,333.33,  as  the  case 
may  be,  will  be  allowed  for  the  year  1913. 


,          «. 

subject     to 

•ormai  tax. 


the 


income  of  noH-       ART.  8.   The  income  of  nonresident  aliens  subject  to  the- 
res,ident  «.  aliePs  normal  tax  of  1  per  cent  shall  consist  of  the  total  gains, 

~  ,    .  1       •        1     <• 

pronts,  and  income  derived  trom  all  property  owned,  and 
from  every  business,  trade,  or  profession  carried  on  and 
capital  invested  within  the  United  States  (to  be  designated 
as  gross  income),  less  deductions  (1  to  8,  inclusive)  spe- 
cifically enumerated  in  paragraph  B  of  the  act  (see  art.  6), 
in  so  far  as  said  deductions  relate  to  said  gains,  profits,  etc. 


Exemption  un- 
not  PaiBweS  in 
abrepincnogme8axof 

nonre  s  i  d  e  n  t 

Nonresident 

tocadditiona?eor 
surtax. 


The  specific  exemption  in  paragraph  C  of  the  act  can  not 
be  allowed  as  a  deduction  in  computing  the  normal  tax  of 
nonresident  aliens. 

Nonresident  aliens  are  subject  to  additional  or  surtax 
the  same  as  prescribed  in  the  case  of  citizens  of  the  United! 
States  or  persons  residing  in  the  United  States. 

102 


The  responsible  heads,  agents,  or  representatives  of  said 
nonresident  aliens  who  are  in  charge  of  the  property  owned 
or  business  carried  on  or  capital  invested  shall  make  full 
.and  complete  returns  of  said  income  and  shall  pay  the  tax 
.as  provided  herein. 

ART.  9.  Under  paragraph  C,  every  single  person  and 
every  married  person  not  living  with  husband  or  wife  in  single  person  or 
the  sense  below  defined,  who  has  a  net  income  exceeding 
$3,000  per  annum,  is  liable  to  pay  the  normal  tax  under  this 
law,  but  in  making  return  for  such  tax  such  person  may 
claim  an  exemption  of  $3,000  from  his  or  her  total  net 
income. 


ART.  10.   Husband  and  wife  living  together  are  entitled  to  .  specific  exemp-* 

,.  c  a**  r\f\r\        1      f  i    •  tion  allowed  with 

an  exemption  of  $4,000  only  from  the  aggregate  net  income  respect  to  aggre- 

of  both,  which  may  be  deducted  in  making  the  return  of  fautes 

such  income  for  taxation.    However,  when  the  husband  and  wife. 
wife  are  separated  and  living  permanently  apart  from  each 
other  each  shall  be  entitled  to  an  exemption  of  $3,000. 


If  the  husband  and  wife  not  living  apart  have  separate  ^  ea 

estates,  the  income  from  both  may  be  made  on  one  return,  ?ate  estatesS?ne 

but  the  amount  of  income  of  each,  and  the  full  name  and  J^™    Swing 

address  of  both,  must  be  shown  in  such  return.  income  of  each. 

The  husband,  as  the  head  and  legal  representative  of  the 
household  and  general  custodian  of  its  income,  should  make 
and  render  the  return  of  the  aggregate  income  of  himself 
and  wife,  and  for  the  purpose  of  levying  the  income  tax  it 
is  assumed  that  he  can  ascertain  the  total  amount  of  said 
income. 

If  a  wife  has  a  separate  estate  managed  by  herself  as   of  ^^^^ 
her  own  separate  property  and  receives  an  income  of  $3,000  tate^fo^be  S- 
or  over,  she  may  make  return  of  her  own  income,  and  if   bamf's  return  "or 
the  husband  has  other  net  income,  making  the  aggregate   c0umseb,£an  db'|  |j' 
of  both  incomes  more  than  $4,000,  the  wife's  return  should  chSed™!?  wife's 
be  attached  to  the  return  of  her  husband,  or  his  income   return- 
should  be  included  in  her  return,  in  order  that  a  deduction 
of  $4,000  may  be  made  from  the  aggregate  of  both  incomes. 
The  tax  in  such  case,  however,  will  be  imposed  only  upon 
so  much  of  the  aggregate  income  of  both  as  shall  exceed 
$4,000. 

If  either  husband  or  wife  separately  has  an  income  equal  Return  re- 
to  or  in  excess  of  $3,000,  a  return  of  annual  net  income  hushed  V^ife 
is  required  under  the  law,  and  such  return  must  include  the  ha*  *"  income 

r    1       1  *    •  1  .  of  $3,000  or  over. 

income  01  both,  and  in  such  -case  the  return  must  be  made 

103 


even   though   the   combined   income   of    both   be   less   than 
$4,000. 

rn  re-  if  the  aggregate  net  income  of  both  exceeds  $4,000,  an 
gate6  incomeg"f  annual  return  of  their  combined  incomes  must  be  made  in 
fefa^^ess^of  tne  manner  stated,  although  neither  one  separately-  may 
$4,000,  alth°^eh  have  an  income  of  $3,000  per  annum.  They  are  jointly  and 
S?*?co*m.ea3  separately  liable  for  such  return  and  for  the  payment  of 

$3,000   or  over.      the    tax 

When  statuses       The  single  or  married  status  of  the  person  claiming  the 

mined6  "  specific  exemption  shall  be  determined  as  of  the  time  of 

claiming  such  exemption  if  such  claim  be  made  within  the 

year  for  which  return  is  made,  otherwise  the  status  at  the 

close  of  the  year. 

i  n  tretnrejshit  ART.  11.  His  or  her  prorata  share  of  the  net  profits  de- 
p^ofitpahowrsre-  rived  from  a  partnership  business,  'whether  or  not  divided 
p°rted-  and  paid  out  shall  be  included  in  the  personal  return  of 

each  partner. 

Partnerships  as       ART.   12.    Partnerships,  as  such,  are  not  subject  to  the 

such,    not    liable    .  .  i  •       j    A  1 

to  tax,  but  state-  income  tax,  and  are  only  required  to  make  return  when 
be  rC~  requested  to  do  so  by  the  Commissioner  of  Internal  Revenue 
or  the  collector  of  internal  revenue  for  the  district  in  which 
said  partnership  has  its  principal  place  of  business  ;  and 
when  a  return  is  required  it  shall  give  a  complete  and  correct 
statement  of  the  gross  income  of  the  said  partnership  and 
also  a  complete  statement  of  the  actual  expenses  of  con- 
ducting the  business  of  said  partnership,  and  the  net  profits 
and  the  name  and  address  of  each  member  of  said  partner- 
ship, and  their  respective  interest  in  the  net  profit  thus 
reported. 


ro>fitrsnterbhinp  ^RT'  ^'  ^e  net  annual  Pr°fits  of  a  partnership  when 
eluded  in  returns  divided  and  paid  to  the  members  thereof  shall  be  included 
^y  each  individual  partner  receiving  same  in  his  annual 
return  of  net  income,  and  the  tax  shall  be  paid  thereon  as 
required  by  law.  When  the  annual  profits  of  a  partnership 
are  not  distributed  and  paid  to  the  members  thereof  the 
respective  interest  of  each  member  in  said  profits  shall 
be  ascertained,  and  the  individuals  entitled  thereto  shall 
include  the  said  amount  in  their  annual  return  as  a  part 
of  their  gross  income,  the  same  as  if  said  profits  had  been 
distributed  and  paid  to  them. 

individual       ART.  14.    Undivided  annual  net  profits  of  partnerships  thus 

partnership  pro  i-  returned    by   the   individual    members    thereof,   and    tax   paid 

thereon,   shall  not,  when  said  profits  are   actually  distributed 

and  paid  to  such  members,  be  again  included  in  their  annual 

return  as  a  part  of  their  gross  income. 

104 


Partnerships  owning  interest  coupons  or  registered   in-     Partnerships  as 

t  ,     P  .  f  .   .  such,      may      file 

terest  orders  may  claim  deduction  for  legitimate  expenses  certificate  claim- 
incurred  in  business  by  filing  the  proper  certificate  with  the  ing  c 
withholding  agent.     (See  article  47.) 

RETURNS. 

ART.  15.    Each  person  of  lawful  age  whose  net  income  is   ^^Sai^etS 
$3,000  or  over  shall,  on  or  before  the  1st  day  of  March,   come  of  $3,000 
1914,  and  on  or  before  the   1st  day  of  March  each  year  £  STade." 
thereafter,  file  an  accurate  return  of  income  under  oath  or 
affirmation,  except  as  herein  provided.     (See  article  8.) 

If  the  person  making  the  return  of  income  has  his  place      Where  filed. 
of  business  in  the  collection  district  in  which  he  resides, 
the  return  shall  be  filed  with  the  collector  of  that  district. 
If  his  principal  place  of  business  is  elsewhere,  the  return 
shall  be  filed  in  the  district  in  which  that  business  is  located. 

In  the  case  of  an  individual  residing  in  a  foreign  country 
return  shall  be  made  to  the  collector  of  internal  revenue  for 
the  district  where  his  principal  business  is  carried  on  within 
the  United  States. 

ART.  16.   The  required  return  will  be  made  on  Form  1040    Form  of  return- 
in   accordance   with   the   instructions   printed   thereon,   and 
will  specifically  set  forth — 

1.  All  income  received  from  each  specific  source  and  the 
total  thereof. 

2.  All  the  separate  items  of  deduction  claimed  under  para- 
graph B  of  this  law. 

3.  The  amount  of  specific  exemption  claimed  under  para- 
graph C. 

4.  All  amounts  of  income  upon  which  tax  has  been  with- 
held at  source  by  withholding  agent  or  agents. 

ART.  17.    When  by  reason  of  minority,  insanity,  absence,      .Wh,en    r.etu£n 

.    ,  ,  «•      «  M-J          1  1-     -j        i •  •  11  1          W1U  be  made  by 

sickness,  or  other  disability,  the  individual  is  unable  to  make  guardian  or  duly 
his  own  return,  the  same  shall  be  made  by  his  guardian  or  authorized  agent- 
duly  authorized  agent. 

In  the  case  of  the  death  of  a  person  whose  net  .income      Executor 

r  i  r      i  1  i   •    1      i        1-         i  rso  s\r\r\     or    administrator 

for  the  part  of  the  year  during  which  he  lived  .was  $3,000   to  make  return 
or  over,  return  of  net  income  shall  be  made  by  the  executor   ln  case  of  death- 
or  administrator  of  the  estate  of  the  deceased,  and  in  com- 
puting the  taxable   income  of   such   estate   there   shall   be 
allowed  the  specific  exemption  provided  by  law. 

ART.  18.  When  the  required  return  has  not  been  made  by      Notice  of  faii- 

j.  f  -11-  ure  to  file  return 

a  person  acting  as  guardian,  agent  of  a  nonresident  alien,  to  be  served  on 
or  by  one  acting  in  any  other  capacity  in  which  the  law  fguent.rdian  °r 

105 


makes  it  a  duty  for  him  to  represent  the  individual,  notice 
of  failure  to  make  such  return  will  be  served  upon  such 
guardian  or  agent. 

,  E71id?mc,e  m*y       The  person  upon  whom  such  notice  is  served  may,  how- 
be  meet  showing  *  if  rt  •  1  •  1     ,1  11 

•oniiabiiity  to  ever,  when  the  facts  warrant,  file  evidence  with  the  collector 
showing  that  the  individual  for  whom  he  acts  did  not  receive 
an  income  subject  to  tax  during  the  year,  or  that  the  said 
guardian  or  agent  had  filed  the  return  with  some  other 
collector. 


f  "er-       ART.  19.    Any  individual  whose  net  income  is  less  than 
onsfor  whom  $20,000,  for  whom  full  return  has  been  made  by  others  as 
beenretm"dsehaby  withholding  agents,  shall  not  be  required  to  make  a  return. 

others. 

Returns  to  be       ART.  20.    If  any  person  liable  to  pay  an  income  tax  for 

ipecetoarrein  certafn  himself  or  others  shall  fail  to  make  and  deliver  the  return 

cases-  required  by  law,  but  shall  consent  to  disclose  the  particulars 

of   any  business  or  occupation   liable  to  pay  such   tax,   it 

shall  be  the  duty  of  the  collector  or  deputy  collector  to 

make  such  list  or  return,  which  being  distinctly  read  and 

consented  to,  signed,  and  verified  by  oath  or  affirmation  by 

the  person  liable  to  make  such  return,  the  same  may  be 

received  as  the  list  or  return  of  such  person. 


Refusal  or  ART.  21.  In  case  any  person  liable  to  make  return  shall 
*'  e  neglect  or  refuse  to  make  or  render  a  list  or  return,  or  shall 
render  a  wilfully  false  or  fraudulent  return,  it  shall  be  the 
duty  of  the  collector,  after  due  notice  has  been  given,  to 
make  such  list,  according  to  the  best  information  he  can 
obtain  by  the  examination  of  such  person,  or  any  other 
evidence.* 


Penalty     for       When  duly  certified  by  the  collector,  the  said  list  thus 
r^ur^orfor  Prepared  shall  be  the  return  of  said  person  and  the  tax  so 
making  false  re-  ascertained  to  be  due,  together  with  the  50  per  cent  or  100 
per  cent  penalty  incurred,  shall  be  assessed  and  collected. 

Returns  to  be  ART.  22.  The  annual  return  must  be  verified  by  oath  or 
an^rrnati°n  °*  tne  Person  making  the  same.  Collectors  are 
directed  by  law  to  require  every  return  to  be  so  verified  by 
the  person  rendering  it.  The  affidavit  may  be  made  before 
the  collector  for  the  district  or  before  any  officer  authorized 
by  law  to  administer  oaths. 


*For    method    of   procedure    in    such    cases,    see   sects.    3173    and    3176,    Rev. 
Stat.,  and  also  Form  1045,  the  form  of  notice  to  be  given  in  such  cases. 

106 


ART.  23.   When  the  return  is  not  filed  within  the  required   ti^ext^sigjne  r°! 
time  by  reason  of  sickness  or  absence  of  the  individual,  an   turn    may    be 
extension  of  time,  not  exceeding  30  days  from  March  1,   gra 
within  which  to  file  such  return  may  be  granted  by  the 
collector,  provided  a  written  application  therefor  is  made 
by  the  individual  within  the  period  for  which  such  extension 
is  desired. 


ART.  24.    The  annual  returns  will  be  forwarded  by  col- 
lectors  by  registered  mail  to  the  Commissioner  of  Internal  Commissioner  of 
Revenue  with  the  list  for  the  month  in  which  the  returns   nueernby    r 
are  filed.     Collectors  must  provide  that  said  returns  and  all   tured  mail- 
forms  relating  thereto  are  securely  sealed  in  envelopes  or 
packages  before  forwarding  the  same. 


'  ART.  25.  All  assessments  shall  be  made  by  the  Commis-  mottfcatfo™enqf  |: 
sioner  of  Internal  Revenue,  and  all  persons  shall  be  notified  *h«n  to  be  paid' 
of  the  amount  for  which  they  are  respectively  liable  on  or 
before  the  1st  day  of  June  of  each  successive  year,  and  said 
assessments  shall  be  paid  on  or  before  the  30th  day  of  June, 
except  in  cases  of  refusal  or  neglect  to  make  such  return 
and  in  cases  of  false  or  fraudulent  returns,  in  which  cases 
the  Commissioner  of  Internal  Revenue  shall,  upon  the  dis- 
covery thereof,  at  any  time  within  three  years  after  said 
return  is  due,  make  a  return  upon  information  obtained,  as 
provided  by  the  law,  and  the  assessment  made  by  the  Com- 
missioner of  Internal  Revenue  thereon  shall  be  paid  by  such 
person  or  persons  immediately  upon  notification  of  the 
amount  of  such  assessment. 


To  any  sum  or  sums  due  and  unpaid  after  the  30th  day  of      Penalty     f  o  r 
June  in  any  year,  and  for  10  days  after  notice  and  demand   tax.ure 
thereof  by  the  collector,  there  shall  be  added  the  sum  of  5 
per  cent  on  the  amount  of  tax  unpaid,  and  interest  at  the 
rate  of  1  per  cent  per  month  upon  said  tax  from  the  time 
the  same  became  due,  except  from  the  estates  of  insane, 
deceased,  or  insolvent  persons. 


ART.  26.   If  any  person,  corporation,  joint-stock  company,   faiTu7eal  t'o5 
association,  or  insurance  company  liable  to  make  returns   returns, 
or  pay  tax  shall  refuse  or  neglect  to  make  returns  at  the 
time  or  times  specified  in  each  year,  such  person  shall  be 
liable  to  a  penalty  of  not  less  than  $20  nor  more  than  $1,000. 


Any  person  or  any  officer  of  any  corporation  required  by  m5SJaltifalse£  °oi 

law  to  make,  render,  sign,  or^verify  any  return  who  makes  fraudulent      re- 

any  false  or  fraudulent  return  or  statement  with  intent  to  * 

107 


defeat  or  evade  the  assesment  required  by  law  to  be  made 
shall  be  guilty  of  a  misdemeanor,  and  shall  be  fined  not 
exceeding  $2,000  or  be  imprisoned  not  exceeding  one  year, 
or  both,  at  the  discretion  of  the  court,  with  the  costs  of 
prosecution. 

ART.  27.  Nothing  in  the  law  or  these  regulations  shall 
be  construed  to  release  a  taxable  person  from  liability  for 
income  tax,  nor  shall  any  contract  entered  into  after  the 
act  of  October  3,  1913,  took  effect  be  valid  in  regard  to  any 
Federal  income  tax  imposed  upon  a  person  liable  to  such 
payment. 

ART.  28.  For  regulations  relative  to  the  claiming  of  ex- 
emptions and  deductions  on  income,  the  tax  on  which  is  to 
be  deducted  and  withheld  at  the  source,  see  article  33. 


108 


PART  2. 


COLLECTIONS  AT  THE  SOURCE. 


Collections     at 
source   applic 


ART.  29.    The  deductions  and  payment  of  the  tax  at  the  only  to  the  nor- 

.  , .  11  •  ma*  tax  imposed 

source  of  income  applies  only  to  the  normal  tax  imposed  upon     individu- 

upon  individuals  and  shall  not  be  construed  to  require  any  ^'  Sourceectnat 

of  such  tax  to  be  withheld  prior  to  the  1st  day  of  Novem-  SPerat1ive1QtJ?til 

1PM  ~  J  Nov.   1,  1913. 

her,  1913. 


Persons,  firms, 
etc.,  required  to 
withhold  tax  at 
the  source. 


ART.  30.  Paragraph  E  of  section  2  of  the  act  provides 
that- 
All  persons,  firms,  copartnerships,  companies,  corporations, 
joint-stock  companies  or  associations,  and  insurance  companies, 
in  whatever  capacity  acting,  including  lessees  or  mortgagors, 
of  real  or  personal  property,  trustees  acting  in  any  trust  capa- 
city, executors,  administrators,  agents,  receivers,  conservators, 
employers,  and  all  officers  and  employees  of  the  United  States 
having  the  control,  receipt,  custody,  disposal,  or  payment  of 
interest,  rent,  salaries,  wages,  premiums,  annuities,  compen- 
sation, remuneration,  emoluments,  or  other  fixed  or  determin- 
able  annual  gains,  profits,  and  income  of  another  person,  ex- 
ceeding $3,000  for  any  taxable  year,  other  than  dividends  on 
capital  stock,  or  from  the  net  earnings  of  corporations  and 
joint-stock  companies  or  associations  subject  to  like  tax,  who 
are  required  to  make  and  render  a  return  in  behalf  of  another, 
as  provided  herein,  to  the  collector  of  his,  her,  or  its  district, 
are  hereby  authorized  and  required  to  deduct  and  withhold 
from  such  annual  gains,  profits,  and  income  such  sum  as  will 
be  sufficient  to  pay  the  normal  tax  imposed  thereon  by  this 
section,  and  shall  pay  to  the  officer  of  the  United  States 
Government  authorized  to  receive  the  same;  and  they  are  each 
hereby  made  personally  liable  for  such  tax. 

ART.  31.   All  persons,  firms,  etc.,  mentioned  in  the  above-      Withhold  i  n  t 
quoted  paragraph  are  referred  to  in  these  regulations  as 
"debtors"  or  "withholding  agents,"  and  the  word  "source" 
is  to  apply  to  the  place  where  the  income  originated  and  is 
payable. 

ART.  32.    The  INCOME  from  which  the  normal  tax  of  1      income  as  to 

.    •      .       i  i  -1111-  -11          which    tax    is    to 

per  cent  is  to  be  WITHHELD  by  withholding  agents  includes   be  withheld. 
all  items  of  income  exceeding  in  the  aggregate  $3,000  and 
payable  to  any  one  person  during  the  year,  except: 

(a)  Dividends  on  capital  stock  or  from  the  net  earnings 
of  corporations  and  joint-stock  companies  or  associations 
and  insurance  companies  subject  to  like  tax. 

109 


(b)  Income  of  an  individual  which  is  not  fixed  or  cer- 
tain and  not  payable  at  stated  periods,  or  is  indefinite  or 
irregular  as  to  amount  or  time  of  accrual,  shall  not  be 
withheld  at  the  source,  but  shall  be  listed  in  the  annual 
return  of  the  individual,  and  the  tax  shall  be  paid  thereon, 
by  him. 


Incomes  derived  from  the  following  professions  and  voca- 
tions come  under  this  head:  Agents  compensated  on  the 
commission  basis,  lawyers,  doctors,  authors,  inventors,  and 
other  professional  persons  whose  income  is  irregular  and 
indefinite. 


Such  persons  shall  make  personal  return  of  all  their  in- 
come, provided  their  total  net  income  from  all  sources  is 
andpean*nuai '  re-  $3,000  or  over.     For  example  i    When  a  lawyer  receives  a 
tainers.  retainer  of  $5,000  as  a  special  fee,  a  deduction  therefrom 

shall  not  be  made  by  the  payer ;  but  when  a  lawyer  receives 
a  retainer  of  $5,000  per  annum,  and  the  exemption  claimed 
is  $3,000,  $2,000  of  such  income  would  be  taxed  and  the 
tax  retained  at  the  source ;  or  if  his  exemption  claimed 
should  be  $4,000,  $1,000  of  such  income  would  be  taxed  and 
the  tax  thereon  withheld  at  the  source. 


(c)   Items  listed   in  article  5,  which  are  wholly  exempt 
from  tax. 


Exemptions  ART.  33,  (a)  In  all  cases  where  the  income  tax  of  a 
c  decert!fi2tepto  person  is  withheld  and  deducted  and  paid  or  to  be  paid  at 
be  filed  with  the  source,  such  person  shall  not  receive  the  benefit  of  the 

withholding,,..  ,  •  ,,  ,.  i/-^/ 

agent.  deduction  and  exemption  allowed  in  paragraph  C  (see  arts. 

9  and   10)    except  by   an   application   to  the  collector  for 

refund  of  the  tax  unless,  he  shall,  not  less  than  50  days  prior 

to  the  day  on  which  the  return  of  his  income  is  due,  file  with 

the  person  who  is  required  to  withhold  and  pay  tax  for 

him,  a  certificate  claiming  the  benefit  of  such  exemption. 

Penalty  for  and  thereupon  no  tax  shall  be  withheld  upon  the  amount  of 

rjp'rfsentatioms  sucn  exemption.    If  any  person  for  the  purpose  of  obtaining 

to  obtain  exemp-  aily  allowance  or  reduction  by  virtue  of  a  claim  for  such 

exemption,    either    for   himself    or    for    any   other   person, 

knowingly  makes  any  false  statement  or  false  or  fraudulent 

representation,  he  shall  be  liable  to  a  penalty  of  $300. 


Deductions un-        (b)    Nor  shall  any  person  under  the  foregoing  conditions 

eForamagiroo8  to  he  allowed   the  benefit  of   any   deduction  provided   for  in 

iei  fhold/ng  subsection  B   (see  art-  6,  1  to  6)   unless  he  shall,  not  less 

agent     or    col-  than  30  days  prior  to  the  day  on  which  the  return  of  his 

income  is  due,  either  file  with  the  person  who  is  required 

110 


to  withhold  and  pay  tax  for  him  a  true  and  correct  return 
(on  Form  1008)  of  his  annual  gains,  profits,  and  income 
from  all  other  sources,  and  also  the  deductions  asked  for, 
and  the  showing  thus  made  shall  then  become  a  part  of 
the  return  to  be  made  in  his  behalf  by  the  person  required 
to  withhold  and  pay  the  tax  and  the  debtor  or  withholding 
agent  will  only  withhold  the  tax  on  the  payments  made  in 
excess  of  the  deductions  claimed  on  said  form.  Or  such 
person  may  likewise  make  application  for  deductions  to  the 
collector  of  the  district  in  which  return  is  made  or  to  be 
made  for  him. 

If   such  person  is   a  minor  or  an  insane  person,  or  is      Certificate  filed 
absent  from  the  United  States,  or  is  unable  owing  to  serious  nor?eh0arlf      ™ 
illness  to  make  the  return  and  application  above  provided   Persons- 
for,  the  return  and  application  may  be  made  for  him  or  her 
by  the  person  required  to  withhold  and  pay  the  tax,  he 
making  oath  on  certificate  (Form  1009)  under  the  penalties 
of  this  act  that  he  has  sufficient  knowledge  of  the  affairs 
and  property  of  his  beneficiary  to  enable  him  to  make  a  full 
and  complete  return  for  him  or  her,  and  that  the  return  and 
application  made  by  him  are  full  and  complete. 


(c)  When,  however,  claims  for  exemption  and  deductions  Claims  for  re- 
as  above  described  are  not  filed  within  the  prescribed  time, 
the  tax  collected  in  excess  can  be  remitted  only  on  presen- 
tation of  a  claim  for  refund  under  the  provisions  of  section 
3220,  Revised  Statutes,  said  claims  to  be  made  either  by 
the  withholding  agent  against  whom  the  assessment  was 
made,  or  by  the  person  on  account  of  whom  such  taxes  were 
withheld. 


Claims  for  abatement  of  taxes  erroneously  assessed,  or     claims    for 
which   are   excessive   in   amount,   may,   prior   to   collection  abatement- 
thereof,  be  filed  under  the  provisions  of  said  section  3220, 
Revised  Statutes,  either  -by  the  withholding  agent  against 
whom  the  assesment  was  made,  or  by  the  persons  on  account 
of  whom  such  taxes  were  withheld. 


In  the  monthly  list  returns  as  now  prescribed  a  space  is  Taxes  with- 

provided  to  show  the  amount  of  taxes  which  the  withhold-  Awarded  tocoi- 

ing  agent  may  remit  to  the  collector  when  such  returns  1?ctor  "ntil  n°- 

/-i     1        »-r>i             -,1  1      ij-                                  MI                 i                          e  tices    of    assess- 

are  filed.     The  withholding  agents  will  not,  however,  for-  ment  have  been 

ward  to  the  collector  amounts  withheld  by  him  until  notices  received- 
of  assessment  are  received  from  the  collector. 


Claims  for  exemption  and  deductions  may  be  filed  with 
•the   withholding  agent  and  claims   for  deductions  may  be 

111 


filed   with   the   collector,   not  later  than  jo  days  prior  to 
March  I. 

withholding       In  cases  where  claims  for  deductions  are  filed  with  the 
statement  collector  within  the  time  prescribed,  the  collector  will  imme- 


of      deductions  diately   furnish   the   withholding  agent    (whose  name  and 

claimed    through  J  ^        *=•    ^^r>\         •  1 

collector  of  dis-  address  must  be  shown  on  Form  1008)  with  a  statement  of 
the  amount  of  deductions  claimed,  and  said  withholding 
agent  shall  not  withhold  and  pay  the  normal  tax  to  the 
extent  of  the  deductions  claimed  as  per  said  list. 


Withholding  agents  should  not  file  their  annual  returns 
until  after  the  expiration  of  the  time  allowed  persons  to 
file  claims  for  exemptions  and  deductions  and  if  claims  for 
deductions  are  filed  with  the  collector  in  the  required  time, 
yet  not  in  sufficient  time  to  have  the  adjustment  made  by 
the  withholding  agent,  the  collector  will  make  the  adjust- 
ment on  the  withholding  agent's  return  and  in  reporting 
such  withholding  agent  for  assessment  will  make  allowance 
for  the  amount  of  such  deductions  claimed.  Notice  of  such 
adjustment,  however,  must  be  furnished  the-  withholding 
agent. 

toTt>e  wlidheto       ART.  34.   The  normal  tax  of  1  per  cent  shall  be  deducted 

collector  of  dis°  and    withheld    at-  the   source,    and   payment    made   to    the 

collector  of  internal  revenue  as  provided  in  the  law,  by  the 

debtor,  or  his,  her,  or  its  duly  appointed  agent  authorized 

to  make  such  deduction  and  payment. 

Tax    withheld       NO    other   person,    firm,    or    organization,    in    whatever 

by  one  agent  not  .  •  «•.«.  •    >  1  j  •  1        r 

to  be  again  with-  capacity  acting,  having  the  receipt,  custody,  or  disposal  01 
agentby  an°ther  any  income,  as  herein  provided,  shall  be  required  to  again 
deduct  and  withhold  the  normal  tax  of  1  per  cent  thereon, 
provided  that  any  such  person,  firm,  or  organization  other 
than  the  debtor  who  has  withheld  said  tax,  shall  file  with 
the  collector  of  internal  revenue  for  his,  her,  or  its  district, 
a  certificate  (Form  1006)  showing  from  whom  and  in  what 
amount  the  tax  has  been  so  withheld. 

Returns  to  be  ART.  35.  Withholding  agents  who  are  required  to  make 
iTcto?  of  internal  monthly  returns  will,  on  or  before  the  20th  day  of  each 
revenue.  month,  file  with  the  collector  for  their  respective  districts 

such  returns  for  the  preceding  month,  accompanied  by  all 
certificates  relating  thereto,  and  there  shall  also  accompany 
said  returns  all  certificates  claiming  exemptions  and  deduc- 
tions which  are  not  required  to  be  listed  thereon;  and  on 
or  before  the  1st  day  of  March  in  each  year  said  withholding 
agents  shall  likewise  file  their  annual  returns  for  the  pre- 
ceding calendar  year.  Annual  returns  (Forms  1041  and 

112 


1042)    must   be   accompanied    by   all    certificates    claiming 
exemptions  and  deductions  relating  thereto. 


ART.  36.  For  regulations  as  to  assessment  and  collection 
of  taxes  from  withholding  agents,  see  article  25  and  "Assess- 
ments and  collections,"  Part  4. 


A. 

Income  derived  from  interest  upon  bonds  and  mortgages  or 
deeds  of  trust  or  other  similar  obligations  of  corporations, 
etc. 


on  income 
in- 


ART.  37.    Under  the  law  a  tax  of  1  per  cent,  designated    .  T.ax  ,°n  inc 

1      11     1  1     1  1  a  i  55     derived  irom   »n- 

as  the  normal  tax,  shall  be  deducted  at  the  source,  terest  on  bonds, 
beginning  November  1,  1913,  from  all  income  accruing  and  ducted*.0 
payabla  to  any  person  subject  to  such  tax  which  may  be 
derived  from  interest  upon  bonds  and  mortgages,  or  deeds 
of  trust,  or  other  similar  obligations,  including  equipment 
trust  agreements  and  receivers'  certificates  of  corporations, 
joint-stock  companies  or  associations,  and  insurance  com- 
panies, although  such  interest  does  not  amount  to  $3,000. 

Income   derived   from  the  interest  upon  the  obligations   ^  stVte^n 
of  a  State,  county,  city,  or  any  other  political  subdivision   Government  ot>- 
thereof ,  and  upon  the  obligations  of  the  United  States  or  its 
possessions,  is  not  subject  to  the  income  tax,  and  certificates 
of  ownership  in  connection  with  coupons  or  registered  inter- 
est orders  for  such  interest  will  not  be  required. 


ART.  38.    The  term  "debtor,"  as  hereinafter  used,  shall   to  apply  to  ail 
apply  to  all  corporations,  joint-stock  companies  or  associa-   etcj  anYtVd'uiy 
tions,   and    insurance   companies;   and   such    "debtor"   may   hoFdlngeand^pay-. 
appoint  a  withholding  and  paying  agents  to  act  for  it  in    ing  agents, 
matters  pertaining  to  the  collection  of  this  tax,  upon  filing 
with   the   collector  of   internal   revenue   for   the   district   a 
proper  notice  of  the  appointment  of  such  agent  or  agents. 
Where    such    withholding   agent    is    so    authorized    by   the 
debtor  corporation,  he  may  file  with  the  collector  of  his 
district  the  required  returns  and  accompanying  certificates 
(arts.  50  and  51),  in  which  case  the  assessment  of  the  tax 
withheld  by  him  will  be  made  in  that  district.     Unless  such 
authority  is  given,  such  reports,  etc.,  will  be  furnished  by 
the  debtor  corporation  to  the  collector  of  its  district  (i.  e., 
the  district  in  which  its  principal  financial  or  business  office 
is  located),  where,  in  such  case,  assessment  will  be  made. 

113 


duSed  a0ndwit£       ART-  39'    For  ,the  Purpose  of   collecting  the  tax  on  all 
held   by  debtor  coupons  and  registered   interest  originating  or  payable  in 
the  United  States,  the  source  shall  be  the  debtor   (or  its 
withholding  and  paying  agent  in  the  United  States),  who 
Banks  and  m-  shall  deduct  the  tax  when  same  is  to  be  withheld,  and  no 
iruerelft^uponf  other    bank,    trust    company,    banking    firm,    or    individual 
for  collection.       taking  coupons  or  interest  orders  for  collection,  or  other- 
wise, shall  withhold  the  tax  thereon,  where  such  coupons 
Certificates  of  or  orders  for  registered  interest  are  accompanied  by  certifi- 
company^nterest  cates  °*  ownership  signed  by  the  owners  of  the  bonds  upon 
coupons  for  col-  which    the   interest   matured.      These   certificates   shall   be 
made  on  the  prescribed  forms  and  shall  be  made  out  by 
each  owner  of  bonds  for  the  coupons  or  interest  orders  for 
each  separate  issue  of  bonds  or  obligations  of  each  debtor. 
(See  arts.  43  and  46.) 


ti{katess,ituwehc|n       ART.  40.  Responsible  banks,  bankers,  and  collecting  agents 
permitted.  receiving  coupons  for  collection  writh  the  aforesaid  certifi- 

cates of  ownership  attached,  may  present  the  coupons  with 
the  attached  certificates  to  the  debtor  or  withholding  agent 
for  collection,  or  such  certificates  may  be  detached  and 
forwarded  direct  to  the  Commissioner  of  Internal  Revenue, 
provided  such  bank,  banker,  or  collecting  agent  shall  substi- 
Record  to  be  tute  for  such  certificates  its  own  certificate,  and  shall  keep  a 

kept    by    collect-  t  1        r  1  1  • 

intr  agent.  complete  record  of  each  transaction,  showing — 


1.  Serial  number  of  item  received. 

2.  Date  received. 

3.  Name  and  address  of  person  from  whom  received. 

4.  Name  of  debtor  corporation. 

5.  Class  of  bonds  from  which  coupons  were  cut. 

6.  Face  amount  of  coupons. 

7.  Exemptions  from  tax  claimed  by  owner  under  para- 
graph C. 

Privilege      of       For  the  purpose  of  identification,  such  substitute  certifi- 
cates  should  be  numbered  consecutively,  and  corresponding 


ed 
countries 


-ries foreign  numbers  given  the  original  certificates  of  ownership. 


The  permission  here  granted  will  extend  to  responsible 
banks,  bankers,  and  collecting  agents  in  foreign  countries, 
through  whom  collection  of  such  interest  coupons  is  made. 

114 


The  various  substitute  certificates  hereby  authorized  will 
correspond  with  the  form  numbers  of  the  ownership  certi- 
ficates detached  by  the  collecting  agent,  except  that  the 
substitute  certificates'  form  numbers  will  be  followed  by  the 
letter  "a." 


ART.  41.    A  debtor  whose  bonds  may  be  registered,  both 

,  ill  r    -i     be  deducted   be-   • 

as  to  principal  or  interest,  shall  deduct  the  normal  tax  ot  1   fore  payment  of 
per  cent   from  the  accruing  interest  on  all   bonds  before  mterest- 
sending  out  checks  for  said  interest  to  registered  owners 
or  before  paying  such  interest  upon  interest  orders  signed 
by  the  registered  holders  of  said  bonds  unless  there  shall 
be  filed  with  said  debtor  or  its  fiscal  agent  (not  later  than 
30  days  prior  to  March  1),  through  whom  said  interest  is 
customarily  paid,  the  proper  certificates  claiming  exemption 
from  liability  for  said  tax  as  herein  provided,  executed  — 


By  a  citizen  or  resident  of  the  United  States,  the  bona 
fide  owner  of   the  registered  obligations,   who  may  claim   tax,    by    whom 
exemption   under   paragraph   C,   section   2,   of   the   income 
tax  law,  or 

By  corporations,  joint-  stock  companies,  associations,  or 
insurance  companies  organized  in  the  United  States,  or 
organizations,  associations,  fraternities,  etc.,  which  are 
either  taxable  or  exempt  from  taxation,  as  provided  in 
paragraph  G,  subdivision  (a),  of  the  act,  or 

By  a  bona  fide  resident  and  citizen  of  a  foreign  country, 
claiming  exemption  as  such. 


ART.  42.    If  the  owners  of  the  bonds  are  individuals  who   ownership  es  t°o 
are  citizens  or  residents  of  the  United  States,  the  aforesaid   |?,edcif^mju°ntn  d0Sf 
certificates  shall  accompany  the  coupons,  or,  with  respect  to   interest  due. 
the  interest  on  registered  bonds,  shall  be  filed  with  payer 
of  said  interest,  and  such  certificates  shall  describe  the  bonds 
and  show  the  amount  of  coupons  attached  or  the  amount  of 
interest  due  such  owners  on  registered  bonds  and  the  name 
and  address  of  the  owners,  and  if  registered  in  names  other 
than  the  owners  such  names  with  addresses  shall  also  be 
given.     Such  certificates  shall  also  show  whether  the  claim- 
ants do  or  do  not  then  claim  exemption  from  taxation  at   empt!™  u  n'd  ?r 
the  source,  under  paragraph  C,  articles  9  and  10  ($3,000,   paragraph  c. 
and   under   certain   conditions   $4,000),   as   to   the   income 
represented  by  such  coupons  or  interest.     The  certificates 
will  be  prepared  on  Form  1000  and  must  show  the  amount, 
if  any,  of  exemption  claimed,  the  total  amount  of  exemption 
to  which  the  claimant  is  entitled  and  must  be  signed  by  the 

115 


claimants,  who  shall  use  their  ordinary  business  signatures. 
The  certificates  shall  also  show  the  postoffice  and  street 
address  of  the  claimants,  the  internal-revenue  district,  and 
the  date  when  signed. 

Certificates       ART.  43.  Duly  authorized  agents  may  sign  such  certificates 
by^duiy  author-  for  the  persons  for  whom  they  act,  and  withholding  agents, 
ired  agents,  etc.   ban^  or  others,  with  whom  such  certificates  are  filed,  if 
satisfied  as  to  the  identity  and  responsibility  of  the  persons 
so  signing,  shall  stamp  or  write  on  the  face  of  each  such 
certificate   "Satisfied   as   to  identity   and   responsibility   of 
agent,"  giving  name  and  address  of  person  thus  certifying. 
Certificates  to  Certificates  so  verified  may  be  accepted  by  all  other  persons, 
withholding  firms>  or  organizations  to  whom  presented,  without  question 
agents.  as  to  authority  of  such  agent.    If  the  person,  firm,  or  organ- 

ization first  receiving  such  certificate  is  not  satisfied  as  to 
the  agent's  identity  and  responsibility,  then,  in  that  event, 
the  agent  shall  furnish  evidence  of  his  authority  to  so  act, 
which  will  be  retained  by  the  person,  firm,  or  organization 
receiving  it,  and  the  certificate  of  ownership  shall  be  in- 
dorsed as  above  provided. 

Tax  to  be  de-  ART.  44.  Whenever  interest  coupons,  accompanied  by  a 
payment*  eof°  fn'  certificate  of  an  individual  who  is  a  citizen  or  resident  of 
terest-  the  United  States,  are  presented  to  a  debtor  or  its  with- 

holding agent  for 'payment,  or  whenever  interest  is  payable 
to  such  individual  on  a  bond  registered  as  to  both  principal 
and  interest,  the  debtor  or  its  withholding  agents  shall 
deduct  and  withhold  the  amount  of  the  normal  tax,  except 
to  the  extent  that  exemption  is  claimed  in  the  certificate  of 
ownership  (Form  1000). 

Where  the  interest  to  be  paid  is  registered,  the  same  form 
of  certificate  shall  be  used  where  exemptions  are  claimed, 
and  it  shall  be  filed  with  the  debtor  at  least  five  days  before 
the  due  date  of  such  interest. 

estTapayTbienteto  ART>  ^'  If  tne  owners  of  tne  bonds  are  corporations, 
certain  corpora-  joint- stock  .companies,  associations,  or  insurance  companies 
fo°nbe  deducted!  organized  in  the  United  States,  no  matter  how  created  or 
organized,  or  organizations,  associations,  fraternities,  etc., 
which  are  either  taxable  or  exempt  from  taxation  as  pro- 
vided in  paragraph  G,  subdivision  (a)  of  the  act,  the  debtor 
is  not  required  to  withhold  or  deduct  the  tax  upon  income 
derived  from  interest  on  such  bonds,  provided  coupons  or 
orders  for  interest  from  such  bonds  shall  be  accompanied 
by  a  certificate  of  the  owners  thereof  certifying  to  such 
ownership,  which  certificates  shall  be  filed  with  the  debtor 
when  such  coupons  or  interest  orders  are  presented  for 
payment. 

Such  certificate  will  be  made  on  Form  1001,  and  must  be 
signed  in  the  name  of  the  organization  (stating  its  place  of 

116 


business)   by  the  president,  secretary,  or  some  other  prin- 
cipal officer  of  the  said  corporation  or  organization  duly   claiming 
authorized  to  sign  same,  and  must  be  properly  dated. 


ART.  46.  Coupons,  or  orders  for  registered  interest,  pay- 
able  in  the  United  States,  representing  the  interest  on  bonds  aliens, 
owned  by  nonresident  aliens,  must  be  accompanied  by  the 
prescribed  certificate  (Form  1004),  but  this  certificate  may 
be  signed  either  by  the  owner  or,  in  behalf  of  the  owner, 
by  a  reputable  bank  or  bankers  or  other  responsible  collect- 
ing agency,  certifying  to  the  ownership  of  the  bonds  and 
giving  the  name  and  address  of  the  bona  fide  nonresident 
and  alien  owners,  and  when  such  certificate  is  thus  attached 
the  normal  tax  of  1  per  cent  on  such  coupons  or  interest 
orders  need  not  be  withheld  at  the  source  by  the  debtor  or 
collecting  agency.  Unless  such  proof  of  foreign  ownership 
is  furnished,  the  normal  tax  of  1  per  cent,  should  be  deducted. 


Foreign  organizations  engaged  in  business  within  the 
United  States  are  subject  to  the  normal  tax  of  1  per  cent 
per  annum  upon  the  amount  of  net  income  accruing  from 
business  transacted  and  capital  invested  within  the  United 
States;  but  said  organizations  shall  be  exempt  from  having 
any  part  of  their  income  withheld  by  a  debtor  or  with- 
holding agent,  and  claim  for  such  exemption  will  be  made 
on  Form  1018. 


ART.  47.    Inasmuch  as  individual  members  of  a  partner-     Certificate* 
ship  are  liable  for  income  tax  upon  their  respective  interest  sh?p,  showfn^fn- 
in  the  net  earnings  of  such  partnership,  the  partnership  may  J,ear1esinof  partner- 
file  with  the  withholding  agent  a  notice  signed  in  the  name  ship  profits,  etc. 
of  the  partnership,  by  a  member  thereof,  claiming  a  deduc- 
tion  of    a   specific   amount   on   account   of   the   legitimate 
expense  incurred  in  conducting  the  business  of  said  part- 
nership; and  upon  receipt  of  said  notice  said  withholding 
agent  shall  not  withhold,  and  shall  not  be  held  liable  for, 
the  normal  tax  on  the  amount  of  income  equal  to  the  amount 
of  deduction  claimed  in  said  notice ;  but  in  no  event  shall 
the  total  of  the  amounts  claimed,  as  provided  herein,  be  in 
excess  of  the  total  amount  of  the  actual  legitimate  annual 
expenses  incurred  by  said  partnership  in  the  conduct  of  its 
business.    Application  for  such  deduction  shall  be  made  on 
Form  1011. 

117 


Foreign   part-       ART.  48.    Foreign  partnerships  or  firms,  all  the  members 

nerships,    certifi-        .  ,&      f  ,   .  .  , 

cate  of  owner-  of  which  are  both  citizens,  or  subjects,  and  residents  of  a 
ship  may  be  filed  foreign  country,  which  are  the  owners  of  bonds  and  mort- 
gages or  deeds  of  trust  or  other  similar  obligations,  includ- 
ing equipment  trust  agreements,  receivers'  certificates,  and 
stocks  of  corporations,  joint-stock  companies  or  associations 
and  insurance  companies,  organized  or  doing  business  in  the 
United  States,  may  file  with  the  debtor  or  withholding  agent, 
with  their  coupons  or  orders  for  registered  interest,  or 
orders  for  other  income  derived  from  property  or  invest- 
ments in  the  United  States,  a  certificate  and  notice  of 
ownership  (Form  1016)  setting  forth  the  above  facts;  and 
the  debtor  or  withholding  agent  shall  not  withhold  any  part 
of  said  income. 


Foreign   part-       ART.  49.  Where  a.  foreign  partnership  or  firm  is  composed 
posed1  o'f  noCn?esi-  of  both  nonresident  foreigners  and  citizens  of  the  United 
and1  citii«Sneof  States,  or  foreigners  residing  in  the  United  States  or  its 
United  States,     possessions,   the   certificate  of   ownership   shall   show    this 
fact,  and  the  name  arid  legal  address  of  each  member  of 
said  partnership  who  is  a  citizen  of  the  United  States,  or 
who  is  a  foreigner  residing  in  the  United  States  or  its  pos- 
sessions, shall  be  given  on  the  back  of  said  certificate,  and 
no  part  of  said  income  shall  be  withheld.     The  said  certifi- 
cate and  notice  of  ownership  in  either  case  above  provided 
shall  be  on  Form  1014. 


list  ART.  50.  Withholding  agents  are  required  to  file  in  dupli- 
cate a  monthly  list  return  (Form  1012)  giving  a  list  of  all 
coupon  or  interest  payments  made  on  which  the  normal  tax 
of  1  per  cent  was  deducted  and  withheld  from  interest  pay- 
ments made  upon  bonds  or  other  similar  obligations,  and 
shall  show  the  name  and  address  in  full  of  the  owners  of 
the  bonds,  amount  of  the  income,  amount  of  exemption 
•claimed,  amount  of  income  on  which  withholding  agent  is 
liable  for  tax,  and  the  amount  of  tax  withheld. 

Forms  1012a,  1012b,  and  1012c  are  to  be  used  where 
Form  1012  does  not  afford  sufficient  space  in  which  to  enter 
all  items. 


i  s  t°s 


Form  1012d,  when  necessary  to  be  used,  shall  be  made 
may  be  used.       jn  duplicate  and  shall  be  a  summary  of  the  monthly  list 
return,  Form   1012,  as  made  in  detail  by  the  withholding 
agent,    and   the    said    summary   and    lists    thereto    attached 

118 


when  properly  filled  in  and  the  summary  signed  and  sworn 
to  shall  constitute  the  complete  monthly  list  return  of  the 
withholding  agent  making  same  as  fully  as  if  each  list 
attached  to  the  summary  was  signed  and  sworn  to  separately. 

An  annual  list  return  (Form  1013)  in  duplicate  is  also 
required  to  be  made  by  debtors  or  withholding  agents  of  the 
normal  tax  of  1  per  cent  withheld  from  interest  payments 
made  upon  bonds  or  other  similar  obligations,  and  it  shall 
be  filed  on  or  before  March  1  of  each  calendar  year. 


ART.  51.   The  monthly  list  return  in  the  form  as  required      Monthly  list 
herein  shall  constitute  a  part  of  the  annual  list  return  to   part  of  the  an- 
be  made  by  debtors  or  withholding  agents,  and  the  debtor  nual  l 
or  withholding  agent  will  not  be  required,  in  making  an 
annual  list  return  of  the  tax  withheld  from  income  derived 
from  interest  upon  bonds  and  mortgages  or  deeds  of  trust, 
or  other  similar  obligations  of  corporations,  joint-stock  com- 
panies,    or     associations     and     insurance     companies,     to 
again  make   an  itemized  list   of   the  amount  of  tax  with- 
held  from  each   person,   but   will   give   in  the   annual   list 
return  the  totals  of  the  monthly  list  return  for  each  month 
of  the  year  for  which  annual  list  return  is  made. 

All  substitute  certificates  of  collecting  agents,  authorized 
by  regulations,  that  are  received  by  debtors  or  withholding 
agents  will  be  considered  the  same  as  certificates  of  owners, 
and  in  entering  same  in  making  monthly  list  returns  debtors 
or  withholding  agents  will  enter  the  name  and  address  of 
the  collecting  agent  and  the  number  of  the  substitute  cer- 
tificate issued  in  lieu  of  the  original  certificate  containing  the 
name  and  address  of  the  owner  of  the  bonds.  Until  the 
further  ruling  on  this  subject  by  this  department  no  list 
return  is  required  to  be  made  of  certificates  of  ownership 
accompanying  coupons  or  registered  interest  orders  filed 
with  a  debtor  or  withholding  agent  when  the  owners  of  the 
bonds  are  not  subject  to  having  the  normal  tax  withheld  at 
the  source,  but  all  such  certificates  of  ownership  shall  be  Certificates  to 
forwarded  by  the  debtor  or  withholding  agent  to  the  col-  collector!™1' 
lector  of  internal  revenue  for  the  district,  on  or  before  the 
20th  day  of  the  month  succeeding  that  in  which  said  certi- 
ficates of  ownership  were  received. 

119 


B. 

Income  derived  from  interest  upon  bonds,  mortgages,  etc., 
paid  by  first  bank  or  collecting  agency  when  certificates  of 
owners  are  not  filed. 


^interest  cou-  ART.  52.  Where  the  coupons  or  interest  orders  are  not 
IpmpaniS  accompanied  by  certificates  as  heretofore  prescribed,  the 
by  certificate.  fa$t  b^k^  trust  company,  banking  firm,  or  individual,  or 
collecting  agency  receiving  the  coupons  or  interest  orders 
for  collection,  or  otherwise,  shall  deduct  and  withhold  the 
tax  and  shall  attach  to  such  coupons  or  interest  orders  its 
own  certificate  (Form  1002),  giving  the  name  and  address 
of  the  owner  of,  or  the  person  presenting  such  coupons  or 
interest  orders  if  the  owner  is  not  known,  with  a  description 
of  the  coupons  or  interest  orders ;  also  setting  forth  the  fact 
that  they  are  withholding  the  tax  upon  them ;  whereupon 
the  debtor  shall  not  again  withhold  the  tax  on  said  coupons 
or  interest  orders,  but  in  lieu  thereof  shall  deliver  to  the 
Collector  of  Internal  Revenue  the  certificate  of  such  bank, 
trust  company,  etc.,  which  is  withholding  such  tax  money. 

soSenpresenfing  Any  corporation,  collecting  agency,  or  person  first  receiv- 
jnterest  coupons  ing  from  the  owner  any  interest  coupons  or  orders  for  the 
i°shed.e  '"  collection  of  registered  interest  should  require  the  persons 

tendering  such  coupons  or  orders  for  registered  interest  to 

satisfactorily  establish  their  identity. 


Monthly  and       ART.  53.   Withholding  agents  receiving  coupons  or  inter- 
hst    re~  est  orders  not  accompanied  by  certificates  of  owners  are 
required  to  file  monthly  and  annual  list  returns  in  duplicate. 
The  required  monthly  list  return  (Form  1044)  shall  give 
a  list  of  all  coupon  or  interest  payments  made  on  which 
the  normal  tax  of  1  per  cent  was  deducted  and  withheld 
and  shall  show  the  name  and  address  in  full  of  the  owner 
of,  or  the  person  presenting  such  coupons  or  interest  orders, 
if  the  owner  is  not  known,  amount  of  the  income  subject  to 
tax  and  the  amount  of  tax  withheld. 

An  annual  list  return  (Form  1044a)  is  also  required  to  be 
made  by  such  withholding  agents,  showing  the  amount  of 
tax  withheld  during  the  preceding  year  on  income  of  this 
character.  This  return  must  be  filed  on  or  before  the  1st 
day  of  March  of  each  calendar  year. 

The  monthly  list  returns  in  the  form  as  required  herein 
shall  constitute  a  part  of  the  annual  list  return  to  be  made, 
and  the  withholding  agent  will  not  be  required,  in  making 

120 


an  annual  list  return  of  the  tax  thus  withheld,  to  again  make 
an  itemized  list  of  the  amount  of  tax  withheld  from  each 
person,  but  will  give  in  the  annual  list  return  the  totals  of 
the  monthly  list  returns  for  the  year  for  which  annual  list 
return  is  made. 


c. 

Income  derived  from  coupons,  checks  or  bills  of  exchange  on 
foreign  bonds,  mortgages,  dividends,  etc. 

ART.  54.   All  persons,  firms,  or  corporations  undertaking    .•  CcflUcitoa^of 

for  accommodation  or  profit  (this  includes  handling  either  bTffs s'  of  e°ex- 
by  way  of  purchase  or  collection)  the  collection  of  coupons,   chanse'  etc- 
checks,  bills  of  exchange,  etc.,  for  or  in  payment  of  interest 
upon  bonds  issued  in  foreign  countries,  and  upon  foreign 
mortgages  or  like  obligations,  and  for  any  dividends  upon 
stock  or  interest  upon  obligations  of  foreign  corporations, 
associations,  or  insurance  companies  engaged  in  business  in      License  to  be 
foreign  countries,  are  required  by  law  to  obtain  a  license   commissioner  5 
from  the  Commissioner  of  Internal  Revenue.  nueernal     Reve" 


ART.  55.   Applications  for  such  license  (Form  1017)  will    .  Application  for 
be  made  to  the  collector  for  the  district  in  which  such  busi-   nSe^to  %ne^e 
ness   is  to  be  carried   on.     Upon  the  acceptance  of   such   tor  of  dist"ct. 
application  the  collector  will  issue  to  the  applicant  without 
cost  a  license   (Form  1010)   which  will  continue  in   force 
until   revoked  or  canceled.     Blank   forms  of   such  license, 
bearing  the  fac  simile  signature  of  the  Commissioner  of 
Internal  Revenue,  will  be  furnished  collectors  on  requisition, 
who  will  in  all  cases  countersign  the  same  before  issuing  it 
to  applicant.     Failure  to  obtain  a  license  or  to  comply  with 
regulations  is  punishable  by  a  fine  not  exceeding  $5,000  or      Penalty     for 

'     .  ,.    J  1      ^1        •  f         failure  to  obtain 

imprisonment  not  exceeding  one  year,  or  both,  in  the  dis-   license, 
cretion  of  the  court. 


ART.  56.  Where  the  collector  is  not  sufficiently  informed 
as  to  the  entire  responsibility  of  the  applicant,  or  where  in 
any  case  he  deems  it  advisable,  the  Commissioner  of  Internal  tncases. 
Revenue  may  upon  the  recommendation  of  the  collector 
require  of  the  applicant  a  bond,  in  duplicate,  with  satisfac- 
tory sureties,  in  a  penal  sum  at  least  equal  to  the  estimated 
amount  of  tax  to  be  withheld  by  such  applicant  during  any 
one  year.  A  form  of  bond  to  be  given  in  such  cases  will  be 
furnished  collectors  on  application  for  the  same.  Where 
licenses  are  issued  without  bond,  the  collector  will  each  year 
inquire  into  and  satisfy  himself  of  the  financial  responsi- 
bility of  the  licensee. 

121 


License  to  be       ART.   57.     When  any  person,   firm  or  corporation  shall 

o  b  t  a  i  n  e  d   for  »     ••      •  r          •          • 

branch  offices.      have  branch  orhces  and  desire  to  collect  ioreign  interest  or 
dividend  income  through  said  branch  offices,  the  application 
for  license  or  licenses  shall  be  made  by  the  person,  firm,  or 
corporation  through  its  principal  office  for  its  branch  office 
or  offices.     Application  for  licenses  in  such  cases  shall  be 
Ap  lication  for  made  to  the  collector  of  internal  revenue  for  the  district  in 
license  to  be  cer-  which  the  home  office  is  located.    The  names  and  addresses 
o?eddistriSect?n  of  the  branch  offices  shall  be  furnished  to  the  collector  in  the 
offices  h  are"*"!?  aPP^cation  of  the  said  principal,  and  if  the  requirements  of 
cated.  the  foregoing  regulations  have  been  complied  with  to  the 

satisfaction  of  the  collector,  he  shall  certify  this  fact  to  the 
collector  of  internal  revenue  for  the  district  in  which  the 
branch  office  is  located,  and  the  collector  to  whom  this  certi- 
fication is  made  shall  issue  to  such  branch  office  a  license,  as 
in  the  case  provided  in  article  55. 


Normal  tax  on       ART.  58.     The  licensed  person,  firm,  or  corporation  first 

'totebest  Withheld  receiving  any  such  foreign  items  for  collection  or  otherwise, 

shall  withhold  therefrom  the  normal  tax  of  1  per  cent,  and 

will  be  held  responsible  therefor.    Such  licensee  shall  indorse 

statement    as  or  stamp  on  each  such  coupon,  check,  or  bill  of  exchange, 

to  4be   il?do?seed  wnen  practicable,  the  words  "Income  tax  withheld  by"  (giv- 

or  appended  to  ing  his  or  their  name,  address,  and  date),  which  shall  be 

coupons,  d    :ks,  sufficjent   evidence   to   relieve   subsequent   holders   or   pur- 

chasers from  the  duty  of  also  withholding  the  income  tax. 


^  ^e  s^ze  or  nature  of  such  coupons,  checks,  etc.,  makes 
of  district  with  it  impracticable  to  make  said  indorsement  thereon,  a  state- 
ducted,  tetces  '  *"  rnent  identifying  the  item  on  which  tax  is  withheld  and  bear- 
ing said  indorsement  may  be  attached  thereto  with  the  same 
effect  as  if  the  indorsement  was  made  directly  thereon. 


ART.  59.  Such  licensee  shall  obtain  the  names  and  ad- 
dresses of  the  persons  from  whom  such  items  are  received 
and  shall  prepare  a  list  of  same  in  duplicate  (on  Form  1043) 
and  file  it  with  the  collector  of  internal  revenue  for  his  dis- 
trict not  later  than  the  20j:h  day  of  the  month  next  succeed- 
ing the  month  in  which  such  items  were  paid.  The  list  shall 
be  dated,  and  shall  contain  the  names  and  addresses  of  the 
taxable  persons,  the  character  and  amount  of  income,  amount 
of  exemption  claimed,  amount  of  income  on  which  withhold- 
ing agent  is  liable  for  tax,  and  the  amount  of  tax  withheld. 
In  addition  to  the  monthly  lists  the  licensee  will,  on  or  be- 
fore the  1st  day  of  March  in  each  year,  file  with  the  col- 

122 


lector  in  duplicate  a  return  (Form  1043a),  showing  the 
amount  of  income  paid  and  the  amount  of  tax  withheld  by 
him  during  the  preceding  year  and  such  other  information 
as  the  form  prescribes. 

The  monthly  list  return  in  the  form  as  required  herein 
shall  constitute  a  part  of  the  annual  list  return  to  be  made 
by  the  licensee  as  withholding  agent,  and  he  will  not  be  re- 
quired, in  making  an  annual  list  return  of  the  tax  withheld 
from  income  described  in  article  54,  to  again  make  an  item- 
ized list  of  the  amount  of  tax  withheld  from  each  person, 
but  will  give  in  the  annual  list  return  the  totals  of  the 
monthly  list  return  for  each  month  of  the  year  for  which 
annual  list  return  is  made. 


ART.  60.     In  the  event  such  coupons,  checks,  or  bills  of       Claims  for  ex- 

.  ,  .  ,  x         ,    -  11         •         -L  emption       under 

exchange  above  mentioned  are  presented  tor  collection  by  an    paragraph  c  may 

individual  claiming  the  benefit  of  the  exemptions  allowable        filed- 

under  paragraph  C   (arts.  9  and  10),  such  individual  shall 

be  permitted   to  avail  himself   of   the  exemption  claimed, 

upon  signing  on  the  form  heretofore  prescribed  for  coupons 

payable  in  the  United  States,  and  no  tax  shall  be  deducted 

for  the  amount  of  the  exemption  so  claimed;  or  if  such 

items  are  presented  by  corporations,  joint-stock  companies,   ex?maPTafrom 

or  associations  and  insurance  companies,  organized  in  the  JJSd"8 a?x  "thhe 

United  States,  the  form  of  certificate  heretofore  prescribed   source. 

for  such  organizations  shall  be  used,  and  in  such  instances 

no  tax  shall  be  deducted. 


ART.  61.     In  both  instances  the  licensee  first  receiving      Certificates  of 
such   items  shall  retain  such  certificates   for  delivery  with   fofvr£ded,    with 
the  lists  aforesaid,  and  with  respect  to  said  coupons,  checks,   t™°nsthlto  coiiec" 
or  bills  of  exchange,  said  licensee  shall  attach  thereto  (iden-    tor. 
tifying  the  items)   or  indorse  or  stamp  thereon  the  words 
"In-come  tax  exemption  claimed  through"  (giving  name  and 
address  of  licensee),  which  shall  be  sufficient  evidence  to 
relieve  subsequent  holders  or  purchasers  from  the  duty  of 
also  withholding  the  tax  thereon. 

The  provisions  for  collection  of  the  tax  on  foreign  obli-       Licensee     to 


gations  herein  set  forth  includes  the  interest  upon  all  foreign 
bonds,  even  though  the  coupons  may,  at  the  option  of  the 
holder,  be  payable  in  the  United  States  as  well  as  in  some 
foreign  country. 


keep  records. 


ART.  62.  All  persons  licensed  shall  keep  their  records  in. 
such  manner  as  to  show  from  whom  every  such  item  has 
been  received,  and  such  records  shall  be  open  at  all  times  to 
the  inspection  of  internal-revenue  officers. 

123 


D. 


Income  derived  from  wages,  rent,  interest,  or  other  fixed  and 
determinable   gains,   profits,   and   income. 


Wages,  sal-  ART.  63.  The  above  title  includes  all  income  derived  from 
anes,  rents,  etc.  salaries,  wages,  rents,  royalties,  interest,  taxable  annuities, 
emoluments,  or  other  fixed  and  determinable  annual  gains, 
profits,  and  income  of  another  person.  ("Income  derived 
from  interest  upon  bonds  and  mortgages,  or  deeds  of  trust, 
or  other  similar  obligations  of  corporations,  etc.,"  and  "In- 
come derived  from  coupons,  checks,  or  bills  of  exchange  on 
foreign  bonds,  mortgages,  dividends,  etc.,"  which  have  been 
covered  by  regulations  under  such  titles,  are  not  to  be  in- 
cluded here.) 


withholding  ART.  64.  Copartnerships,  companies,  corporations,  joint- 
smdnta t0taxd*Ct  stoc^  companies  or  associations,  insurance  companies,  in 
whatever  capacity  acting,  including  lessees,  mortgagors  of 
real  or  personal  property,  trustees  acting  in  any  trust  ca- 
pacity, executors,  administrators,  agents,  receivers,  con- 
servators, employers  and  all  officers  and  employees  of  the 
United  States,  hereinafter  referred  to  as  "debtors"  or  with- 
holding agents,  having  the  control,  receipt,  custody,  disposal, 
or  payment  of  income  as  described  in  article  63,  shall  de- 
duct and  withhold  from  such  annual  gains,  profit,  and 
income,  when  the  same  shall  have  reached  an  aggregate 
amount  in  excess  of  $3,000,  such  sum  as  will  be  sufficient  to 
pay  the  normal  tax  of  1  per  cent  imposed  by  law,  and  shall 
pay  the  taxes  so  withheld  to  the  collector  of  internal  revenue 
for  the  district  in  which  the  said  withholding  agent  resides 
or  has  his,  her,  or  its  principal  place  of  business. 


withheld  on  per?       ART:   65'     A   withholding  agent  who   pays   monthly,   or 
odicai  payments  periodically  during  the  year,  interest,  rents,  salaries,  wages, 
•Jregate^I.ooo^"  etc.,  shall  not  withhold  the  said  tax  until  such  time  as  the  in- 
terest, rents,  salaries,  wages,  etc.,  shall  have  reach  an  aggre- 
gate amount  in  excess  of  $3,000.     When  such  amount  has 
been   reached,   such   agent   shall   withhold   the  tax   on   the 
whole  $3,000,  and  any  excess  thereof,  unless  the  person  to 
whom  the  income  is  due  files  a  notice  claiming  exemption 

Exemption  un-  ,  i      /~>     /  •  1     i    •  -><•>/     \\       •  i   •    i 

der  paragraph  c  under  paragraph  C  (as  provided  in  art.  33(a)),  m  which 

.nay  be  claimed.  case  ^  withholding  agent  shall  withhold  only  the  tax  on  the 

income  in  excess  of  said  exemption  of  $3,000  or  $4,000  (as 

the  case  may  be),  and  the  tax  so  withheld  shall  be  paid  as 

required  by  law. 

124 


ART.  66.     In  case  the  person  to  whom  the  income  is  due    .  Deductions  un- 

•  «      ,  i   ''*  -      •  1  der      paragraph 

is  entitled  to  any  deductions  under  paragraph  B,  he  may   B     may     be 

avail  himself  of  such  deductions  by  filing  with  the  with- 

holding agent  Form  1  008,  as  provided  in  article  33  (b),  in 

which  case  the  withholding  agent  will  only  withhold  the  tax 

on  such  income  in  excess  of  the  deductions  claimed  on  said 

form. 


Tax  not  to  be 
A  ^->7         T->       1          1         i  •  withheldby 

ART.   o/.      Banks,    bankers,   trust   companies,   and  other   banks  .on  inter- 
banking  institutions   receiving  deposits  of  .money,  are  not  ld 

required  to  withhold  at  the  source  the  normal  income  tax 
of  1  'per  cent  on  interest  paid,  or  accrued,  or  accruing  to 
depositors,  whether  on  open  accounts  or  on  certificates  of 
deposit;  but  all  such  interest,  whether  paid  or  accrued  and 
unpaid,  must  be  included  in  the  annual  income  return  of  the 
person  entitled  to  receive  such  interest,  whether  on  open 
account  or  on  the  certificate  of  deposit. 


ne°£s   given 


ART.  68.  When  a  note  shall  have  been  given  in  payment  Tax  to  be  with- 
of  interest,  rents,  or  other  income  accruing  after  March  1, 
1913,  the  maker  of  the  note,  as  the  "debtor"  and  as  the 
"source"  where  the  income  originates,  is  required,  in  paying 
such  note,  to  withhold  the  normal  tax  of  1  per  cent  on  the 
entire  amount  of  the  note,  if  in  excess  of  $3,000,  unless 
claim  for  exemption  or  deductions  under  article  33  (a)  or 
33  (b)  is  filed,  in  which  case  the  said  tax  shall  be  withheld 
only  on  the  amount  of  said  note  in  excess  of  the  exemption 
or  deductions  so  claimed. 

If  any  person  who  has  purchased  or  discounted  any  such      Purchasers   of 
notes  omitted,  in  acquiring  them  from  previous  holder,  to 
make  a  deduction  or  allowance  for  said  tax,  he  can  look  for     ot 
relief  only  to  the  person  from  whom  the  notes  were  ob- 
tained, as  the  "debtor,"  the  maker  of  said  notes,  is  required 
to  deduct,  withhold,  and  pay  to  the  collector  of  internal  rev- 
enue the  amount  of  the  normal  tax  of  1  per  cent  which  may 
be  due  thereon. 


been 


ART.  69.     Withholding  agents  shall  make  an  annual  list      Annual  l 
return   (Form   1042),  in  duplicate,  to  the  collector  of  in-  £oidin  b 
ternal   revenue   for  the   district   in  which  the  withholding 
agent  resides  or  has  his  principal  place  of  business  on  or 
before  the   1st  day  of   March  in   each  year,   showing  the 
names  and  addresses  of  persons  who  have  received  incomes 
in  excess  of  $3,000,  on  which  the  normal  tax  of  1  per  cent 
has  been  deducted  and  withheld  during  the  preceding  year. 
This  return  must  be  accompanied  by  all  forms  presented 
claiming  exemptions  and  deductions. 

125 


st  re- 
a  emsth" 


E. 


Fiduciaries. 


ART.  70.     Guardians,  trustees,  executors,  administrators, 
agents,  to  deduct  agents,   receivers,   conservators,   and   all   persons,   corpora- 
tions, or  associations  acting  in  any  fiduciary  capacity  here- 
inafter referred  to  as  fiduciary  agents,  who  hold  in  trust 
an  estate  of  another  person  or  persons,  shall  be  designated 
duct?on°e  to  dbe  ^e  "source"  for  the  purpose  of  collecting  the  income  tax, 
filed  with  other  and  by  filing  notice  with  other  debtors  or  withholding  agents 
agents.  °       "  g  said  fiduciary  shall  be  exempt  from  having  any  income,  due 
to  them  as  such,  withheld  for  any  income  tax  by  any  other 
debtor  or  withholding  agent.     Other  debtors  or  withholding 
agents  upon  receipt  of  such  notice  shall  not  withhold  any 
part  of  such  income  from   said  fiduciary  and   will  not  in 
such  case  be  held  liable  for  normal  .tax  of  1  per  cent  due 
thereon.    The  form  of  notice  to  be  filed  with  the  debtor  or 
withholding  agent  by  fiduciary  will  be  on  Form  1015.   Where 
such  exemption  is  not  claimed,  notice  thereof  on  Form  1019 
should  be  filed  with  the  withholding  agent. 


Annual  return       ART.  71.    Fiduciaries  shall,  on  or  before  March  1  of  each 

to    be    made    to  111  '    r    . «        •  •          •    . 

the  collector  of  year,  make  and  render  a  return  of  the  income  coming  into 
the  district.  their  custody  or  control  and  management  from  each  trust 
or  estate  when  the  annual  interest  of  any  beneficiary  in 
said  trust  or  estate  is  in  excess  of  $3,000.  This  return 
(Form  1041)  must  be  filed  with  the  collector  for  the  dis- 
trict in  which  the  fiduciary  resides  or  has  his  principal  place 
of  business,  and  shall  contain  an  itemized  statement  of  the 
gross  income  and  deductions  claimed. 

Notice  of  failure  to  file  return  as  required  shall  be  served 
upon  the  fiduciary.  (See  art.  18.) 

The  entries  on  the  first  page  of  Form  1041  in  column 
headed  "Amount  of  income  paid  or  accrued  to  beneficiaries" 
should  not  include  their  respective  shares  of  income  de- 
rived from  dividends  on  the  stock  or  from  the  net  earnings 
of  corporations,  joint-stock  companies,  etc.,  subject  to  like 
tax  or  the  income  on  which  the  normal  tax  of  1  per  cent 
has  been  deducted  and  withheld  at  the  source  by  the  debtor 
or  the  prior  withholding  agent,  as  these  two  items  of  income 
are  treated  as  deductions  in  determining  the  amount  of  in- 
come subject  to  tax  for  which  the  fiduciary  as  withholding 
agent  has  to  account. 

126 


When  the  share  of  any  beneficiary,  therefore,  in  the 
amount  stated  on  line  3  of  the  first  page  of  said  return  is  in 
excess  of  $3,000,  return  must  be  made. 


ART.  72.     As  each  such  fiduciary  acts  solely  in  behalf  of     ,  Return  ,to  |n- 

,        ,  ~    .       .  ...  .         J  .  *  .        ,    .        elude     only     in- 

the  beneficiaries  of  the  trust,  the  annual  return  required  in  come  accruing 
such  cases  has  reference  only  to  the  income  accruing  and  otheT^seih^ 
payable  through  said  fiduciary,  and  not  to  the  income  of  the  thorized  by 

i     J     r    •  i       •        j     r  rr     1  1       beneficiary. 

beneficiary  derived  from  other  sources.  If,  Jiowever,  such 
fiduciary  is  legally  authorized  to  act  for  such  beneficiary  as 
agent  or  attorney  in  fact,  he  may  in  such  case  also  make  for 
the  beneficiary  the  personal  annual  return  (Form  1040)  re- 
quired by  law. 


ART.  73.     The  annual  return  of  the  fiduciary  shall  con-      Annual  return 
tain  a  list  of  the  name  and  full  address  of  each  beneficiary   *9   inclu^e.    .list 

...  ,.          .  ,     .  ,-i  °*     beneficiaries, 

and  the  share  of  said  income  to  which  each  may  be  en-   showing   tax 
titled.     There  must  also  be  entered  opposite  the  name  of   Schhel< 
each  beneficiary  the  amount  of  exemption,  if  any,  claimed 
by  him,  the  amount  of  income  on  which  the  fiduciary  is 
liable  for  tax,  and  the  amount  of  tax  withheld,  and  the  said 
return  shall  be  signed  and  sworn  to  by  the  fiduciary,  if  an 
individual,    making    same,    and   his    full    address    must    be 
stated.     If  the  fiduciary  is  an  organization,  the  return  shall 
be  signed  and  sworn  to  by  the  president,  secretary,  or  treas- 
urer of  said  organization. 


Return    to    be 


ART.  74.     Fiduciaries  having  control  of  any  portion  of  an 

i    •  .  i       •          ,1  1  1-        M  1  eurn      o       e 

annual  income  accruing  during  the  year,  but  not  distributed    made   of  undis- 

or  paid  to  the  beneficiaries  during  the  year,  shall,  in  render-    Jj^J^ 

ing  their  annual  return   (Form  1041),  give  the  name  and   the  year 

address  of  each  of  said  beneficiaries  having  a  distributive 

interest  in  said  income,  and  shall   furnish  all  information 

called  for  in  such  returns.     The  fiduciary  shall  in  all  such 

cases  withhold  and  pay  to  the  collector,  as  provided  by  law, 

the  normal  tax  of  1  per  cent  upon  the  distributive  interest 

of  each  of  said  beneficiaries  when  in  excess  of  $3,000,  the 

same  as  if  said  income  was  actually  distributed  and  paid. 

Exemption  under  paragraph  C,  however,  may  be  claimed  by 

the  beneficiary  or  his  legal  representative  bv  filing  his  claim    income.      Para- 

r  i«  -.1     ,1        r  j        •  graph    C. 

for  exemption  with  the  fiduciary  agent. 


Claim  for  ex- 
i  b  u  " 


.ART.  75.     When  the  normal  tax  on  undivided  annual  net      Tax 


withheld 


income  has  been  so  withheld,  such  tax  shall  not  be  again  on  ""divided  in- 

.,,.,.,,  .....  .  ,fc>.  come    not    to    be 

withheld  when  such  portion  of  the  income  is  actually  dis-  again     withheld 

tributed  and  paid  to  said  beneficiary.  lisSbmed"16 

127 


PART  3. 

RELATING  TO  THE  INCOME  TAX  IMPOSED  BY  SECTIONS  2  AND 
4  OF  THE  ACT  OF  OCTOBER  3,  1913,  ON  CORPORATIONS,  JOINT- 
STOCK  COMPANIES  OR  ASSOCIATIONS,  AND  INSURANCE 
COMPANIES. 


Organiza-       ART.  76.     Under  the  provisions  of  sections  2  and  4  of 

tions    subject   to  .     _  .,  £    _  ...  . 

tax.  the  act  of  October  3,   1913,  every  corporation,  joint-stock 

company  or  association,  and  every  insurance  company  or- 
ganized in  the  United  States,  no  matter  how  created  or  or- 
One  per  cent  ganized,  except  those  specficially  exempted,  shall  be  subject 
to  pay  annually  an  income  tax  of  1  per  centum  per  annum 
upon  the  entire  net  income  arising  or  accruing  from  all 
sources  during  the  preceding  calendar  or  fiscal  year,  as  the 
case  may  be.  Certain  exceptions  as  to  taxability  will  be 
noted  specifically  hereinafter. 


on  entire  net  in- 
come. 


Foreign     cor-       ART.  77.    A  similar  tax  shall  be  levied,  assessed  against, 

porations  subject  .  ,  .     .  &. 

to  the  tax.  and  paid  annually  by  corporations,  joint-stock  companies  or 
associations,  and  insurance  companies  organized,  authorized, 
or  existing  under  the  laws  of  any  foreign  country  upon  the 
amount  of  net  income  accruing  from  business  transacted  and 
capital  invested  within  the  United  States  during  such  year. 


defined  P°rations  ^RT>  ^'  "Corporation"  or  "corporations,"  as  used  in 
these  regulations,  shall  be  construed  to  include  all  cor- 
porations, joint-stock  companies  or  associations,  and  all  in- 
surance companies  coming  within  the  terms  of  the  law,  and 
such  organizations  will  hereinafter  be  referred  to  as  "cor- 
porations." 

Associations,  ART.  79.  It  is  immaterial  how  such  corporations  are 
trusts,  etc.,1  sub-  created  or  organized.  The  terms  "joint-stock  companies" 
ject  to  tax.  or  "associations"  shall  include  associates,  real  estate  trusts, 
or  by  whatever  name  known,  which  carry  on  or  do  business 
in  an  organized  capacity,  whether  organized  under  and  pur- 
suant to  State  laws,  trust  agreements,  declarations  of  trusts, 
or  otherwise,  the  net  income  of  which,  if  any,  is  distributed, 
or  distributable,  among  the  members  or  share  owners  on 
the  basis  of  the  capital  stock  which  each  holds,  or,  where 
there  is  no  capital  stock,  on  the  basis  of  the  proportionate 
share  of  capital  which  each  has  invested  in  the  business  or 
property  of  the  organization,  all  of  which  joint-stock  com- 
panies or  associations  shall,  in  their  organized  capacity,  be 
subject  to  the  tax  imposed  by  this  act. 

Corporations       ART.  80.     Every  corporation  not  specifically  enumerated 
returns?  *'   aake  as  exempt  shall  make  the  return  of  annual  net  income  re- 

128 


quired  by  law  whether  or  not  it  may  have  any  income  liable 
to  tax,  or  whether  or  not  it  shall  be  subordinate  to  or  con- 
trolled  by   another   corporation.      Mutual   telephone   com-     hMutuai  teie- 
panies,  mutual  insurance  companies,  and  like  organizations,   t*aTe  insurance 
although  local  in  character,  and  whose  income  consists  large-   not  exempt. 
ly  from  assessments,  dues,  and  fees  paid  by  members,  do 
not  come  within  the  class  of  corporations  specifically  enu- 
merated as  exempt.  Their  status  under  the  law  is  not  depend- 
ent upon  whether  they  are  or  are  not  organized  for  profit. 
Not  coming  within  the  statutory  exemption,  all  organizations 
of  this  character  will  be  required  to  make  returns  of  annual 
net  income,  and  pay  any  income  tax  thereby  shown  to  be  due. 
For  this  purpose  the  surplus  of  receipts  of  the  year  over 
expenses   will  constitute  the  net  income  upon   which  the 
tax  will  be  assessed. 


A  railroad  or  other  corporation  which  has  leased  its 
properties  in  consideration  of  a  rental  equivalent  to  a  cer- 
tain rate  of  dividends  on  its  outstanding  capital  stock  and 
the  interest  on  the  bonded  indebtedness,  and  such  rental  is 
paid  by  the  lessee  directly  to  the  stock  and  bond  holders, 
should,  nevertheless,  make  a  return  of  annual  net  income 
showing  the  rental  so  paid  as  having  been  received  by  the 
corporation. 


ART.  81.     A  railroad  company  operating  leased  or  pur-    .interest  deduc- 
chased  lines   shall  include  all  receipts  derived  therefrom,   mfonsy  operat- 
and,  if  bonded  indebtedness  of  such  lines  has  been  assumed,  ^chased  line? 
such  operating  company  may  deduct  the  interest  paid  there- 
on to  an  amount  not  exceeding  one-half  of  the  sum  of  its 
interest-bearing  indebtedness  and  its  paid-up  capital  stock 
outstanding  at  the  close  of  the  year. 


ART.  82.     Corporations  operating  leased  lines  should  not      Lessee  corpo- 

•      1     j      ^i  •-    i  i         r   xi        i  «•  ,1      •       rations     not     to 

include  the  capital  stock  of  the  lessor  corporations  in  their   include     capital 
own  statement  of  capital  stock  outstanding  at  the  close  of   ed^s% 
the   year.     The   indebtedness   of   such   lessor  corporations   corporations, 
should  not  be  included  in  the  statement  of  the  indebtedness 
of  the  lessee  unless  the  lessee  has  assumed  the  same.    Each 
leased  or  subsidiary  company  will  make  its  own  separate  re-  , 
turn,  accounting  for  therein  all  income  which  it  may  have 
received  by  way  of  dividends,  rentals,  interest,  or  from  any 
other  source. 


ART.  83.     A  foreign  corporation  having  several  branch 

offices  in  the  United  States  should  designate  one  of  such  branch  offices 

branches  as  its  principal  office  and  should  also  designate  Ye^S?at?at 

the  proper  officers  to  make  the  required  return.  cipaf  office. 

129 


ART.  84.    A  corporation  organized  during  the  year  should 
toemakr     render  B.  sworn  return  on  the  prescribed  form,  covering  that 
portion  of  the  year    (calendar  or  fiscal)    during  which  it 
was  engaged  in  business  or  had  an  income  accruing  to  it. 


Corporations       ART.  85.     Corporations  going  into  liquidation  during  any 
datiogn.mt  tax  period  may,  at  the  time  of  such  liquidation,  prepare  a 

"final  return"  covering  the  income  received  or  accrued  to 
them  during  the  fractional  part  of  the  year  during  which 
they  were  engaged  in  business,  and  immediately  file  the 
same  with  the  collector  of  the  district  in  which  the  corpora- 
tions have  their  principal  places  of  business. 


Limited  part-  ART.  86.  Limited  partnerships  are  held  to  be  corpora- 
tions within  the  meaning  of  this  act  and  these  regulations, 
and  in  their  organized  capacity  are  subject  to  the  income 
tax  as  corporations. 


Corporations  ART.  87.  The  act  specifically  enumerates  and  exempts 
tax.empt  £r°m  from  its  provisions  and  requirements  labor,  agricultural,  or 
horticultural  organizations,  mutual  savings  banks  not  having 
a  capital  stock  represented  by  shares,  fraternal  beneficiary 
societies,  orders,  or  associations  operating  under  the  lodge 
system,  or  for  the  exclusive  benefit  of  the  members  of  a 
fraternity  itself  operating  under  the  lodge  system,  and  pro- 
viding for  the  payment  of  life,  sick,  accident,  and  other 
benefits  to  the  members  of  such  societies,  orders,  or  asso- 
ciations, and  dependents  of  such  members,  domestic  build- 
ing and  loan  associations,  cemetery  companies  organized  and 
operated  exclusively  for  the  mutual  benefit  of  their  mem- 
bers, any  and  all  corporations  or  associations  organized  and 
operated  exclusively  for  religious,  charitable,  scientific,  or 
educational  purposes,  no  part  of  whose  net  income  inures 
to  the  benefit  of  any  private  stockholder  or  individual,  busi- 
ness leagues,  chambers  of  commerce,  or  boards  of  trade  not 
organized  for  profit,  no  part  of  the  net  income  of  which 
inures  to  the  benefit  of  the  private  stockholder  or  individual, 
and  civic  leagues  or  similar  organizations  not  organized  for 
profit,  but  operated  exclusively  for  the  promotion  of  social 
welfare. 


Domes  tic       Domestic  building  and  loan  associations  are  among  those 

loan  associations  enumerated  as  exempt  from  the  requirements  of  the  law. 

defined.  Mutual-  A  domestic  building  and  loan  association  is  held  to  be  one 

organized  under  and  pursuant  to  the  laws  of  the  United 

States,  or  of  a  State  or  Territory  thereof,  or  under  the  laws 

applicable  to  Alaska  or  the  District  of  Columbia.    Mutuality 

130 


in  operation  and  in  the  distribution  of  profits  and  benefits  is 
essential  to  exemption.  Therefore,  in  order  to  come  within 
the  exempted  class  such  associations  must  not  only  be 
"Domestic,"  as  defined,  but  they  must  be  organized  and 
operated  exclusively  for  the  mutual  benefit  of  the  members ; 
that  is,  all  the  profits  and  benefits  provided  for  in  the  arti- 
cles of  association  and  by-laws  must  be  ratably  distributed 
among  all  members  regardless  of  the  kind  of  stock  held, 
according  to  the  amount  of  money  they  have  on  deposit.  An 
association  issuing  different  classes  of  stock  upon  which 
different  rates  of  interest  or  dividends  are  guaranteed  or 
paid,  does  not  come  within  the  exempted  class. 


ART.   88.     All  corporations  and  all  beneficiary   societies 
enumerated   above  shall  by  affidavit,  or  otherwise,  at  the   their    right    to 
request  of  the  collector  or  Commissioner  of  Internal  Reve-   exemPtlon- 
nue,   establish   their   right  to   the   exemption   provided,   in 
which  case  it  will  not  be  sufficient  to  merely  declare  that  they 
are  exempt,  but  they  must  show  the  character  and  purpose 
of  the  organization,  the  manner  of  distributing  the  net  in- 
come, if  any,  or  that  none  of  the  net  income  inures  to  the 
benefit  of  any  private   stockholder  or  individual.     In  the 
absence  of  such  a  showing,  such  organizations  may,  at  any 
time,  be  required  to  make  returns  of  annual  net  income  or 
disclose  their  books  of  account  to  a  revenue  officer  for  exam- 
ination in  order  that  the  status  of  the  company  may  be  de- 
termined. 
3577— Regulations— 22P— 2-14      Jolley  ELEVEN 


ART.  89.     A  society  or  association  "operating  under  the  Society  or  asso- 

,      ,                           ,,     .               J  .  ,                                                           -1  ciation       subject 

lodge  system     is  considered  to  be  one  organized  under  a  to  exemption  de- 
charter,   with   properly  appointed  or  elected  officers,  with  fined' 
an  adopted  ritual  or  ceremonial,  holding  meetings  at  stated 
intervals,  and  supported  by  fees,  dues,  or  assessments. 


ART.   90.     Cemetery  companies   organized  and  operated      cemetery  com- 
exclusively   for   the  mutual  benefit   of   their   members   are  ^^uSai^ene- 
exempt.     The  provisions  of  the  law  clearly  indicate  that   fit  of  their  mem- 
companies  which  operate  cemeteries  for  profit  are  liable  to 
the  tax.    The  status  of  cemetery  associations  under  the  law 
will,  therefore,  depend  upon  the  character  and  purpose  of 
the  organization  and  what  disposition  is  made  of  the  income. 


ART.  91.    Any  corporation,  concerning  whose  status  under  Corporations 

the  law  there  is  any  doubt,  or  which  does  not  clearly  come  £h7xempation  15- 

within  one  or  another  of  the  classes  of  those  specifically  in  ,doubt  m  u  s  * 

1                                   ,         1  1    /-I                              /  •      •,  1       •,     '  r     1  make   return. 

enumerated  as  exempt,  should  file  a  return  (in  blank  if  de- 


sired)  and  attach  thereto  a  statement  setting  out  fully  the 
nature  and  purpose  of  the  organization,  the  source  of  its 
income,  and  what  disposition  is  made  of  it,  and  particularly 
of  any  surplus. 

Coop  erative      ART.  92.    Cooperative  dairies  not  issuing  stock  and  allow- 

dairies  not  issu-    .  •••!•-«  i  <•        •  -n      r          •   i       i 

ing  stock  and  ing  patrons  dividends  based  on  butter  fat  in  milk  furnished 
dWS  eTdT  are  not  liable.  In  such  case  the  "dividends"  are  the  pur- 
exempt.  chase  price  of  the  raw  material  furnished. 


ART-  93.  The  income  derived  from  any  public  utility  or 
ides  is  not  tax-  from  the  exercise  of  any  essential  governmental  function, 
which  income  accrues  to  any  State,  Territory,  the  District 
of  Columbia,  or  any  political  subdivision  of  a  State, 
Territory,  or  the  District  of  Columbia,  and  any  in- 
come accruing  to  the  government  of  the  Philip- 
pine Islands,  or  to  Porto  Rico,  shall  not  be  subject  to 
the  tax  imposed  by  this  act.  In  cases  wherein  any  State, 
Territory,  or  the  District  of  Columbia,  or  any  political  sub- 
division of  a  State,  or  Territory,  shall  have,  prior  to  the  pas- 
sage of  this  act,  contracted  in  good  faith  with  any  person 
or  corporation  to  acquire,  construct,  operate,  or  maintain  a 
public  utility,  no  income  tax  pursuant  to  this  act  shall  be 
levied  upon  the  income  derived  from  the  operation  of  such 
public  utility,  so  far  as  the  assessment  and  payment  of  such 
tax  will  impose  a  loss  or  burden  upon  such  State,  Territory, 
Persons  or  cor-  District  of  Columbia,  or  political  subdivision.  But  the  per- 

porations       not  ,  •  •  i  •  1     r  i  ri 

exempt.  son  or  corporation  is  not  relieved  irom  the  payment  ot  the 

tax  upon  that  portion  of  the  income  accruing  to  him,  or  it, 
under  such  contract. 


ART-  94.  Ordinary  copartnerships  are  not,  as  such,  sub- 
corporations.  ject  to  the  tax  imposed  by  this  act,  but  the  individual  mem- 
bers of  any  such  partnership  are  liable  for  income  tax  only 
in  their  individual  capacity  on  their  respective  shares  of  the 
earnings  of  such  partnership,  whether  such  earnings  be  dis- 
tributed or  not. 


ART-  95-  Ful1  amount  of  stock,  as  represented  by  the  par 
capital  stock.  value  of  the  shares  issued,  is  to  be  regarded  as  the  paid-up 
capital  stock,  except  when  such  stock  is  assessable  on  ac- 
count of  deferred  payments,  or  payable  in  installments,  in 
which  case  the  amount  actually  paid  on  such  shares  will 
constitute  the  actual  paid-up  capital  stock  of  the  corpora- 
tion. 

hoSr<dSS  incined!  ART-  96.  The  following  definitions  and  rules  are  given 
for  determining  the  gross  income  of  various  classes  of  cor- 
porations : 

132 


Gross   income  of  banks  and  other  financial  institutions     tG?oss    'lncom* 

r     .  ,  «•«•«•  •  ..     of    banks    and 

consists  of  the  total  revenue  derived  from  the  operation  of    other     financial 
the  business,  including  income,  gains,  or  profits  from  all  mstltutlons- 
other  sources,  as  shown  by  the  entries  on  the  books  of  ac- 
count, within  the  calendar  or  fiscal  year  for  which  the  re- 
turn is  made. 


ART.  97.  Gross  income  of  insurance  companies  consists 
of  the  total  revenue  derived  from  the  operation  of  the  busi- 
ness,  including  income,  gains,  or  profits  from  all  other 
sources,  as  shown  by  the  entries  on  the  books  of  account 
within  the  calendar  or  fiscal  year  for  which  the  return  is 
made,  except  as  modified  by  the  express  exemptions  of  the 
articles  which  apply  to  mutual  fire,  mutual  marine,  and  life 
insurance  companies. 


Gross   income 

a  n 


ART.   98.     Mutual   fire   insurance   companies,   which'  re-      Gross    income 


quire  their  members  to  make  premium  deposits  to  provide  i 
for  losses  and  expenses,  shall  not  return  as  gross  income  any  Panies- 
portion  of  the  premium  deposits  returned  to  their  policy- 
holders,  but  shall  return  as  taxable  income  all  income  re- 
ceived by  them  from  all  other  sources  plus  such  portions  of 
the  premium  deposits  as  are  retained  by  the  companies  for 
purposes  other  than  the  payment  of  losses  and  expenses  and 
reinsurance  reserves. 


of     mutual     fire 
insurance      com- 


ART.  99.  Mutual  marine  insurance  companies  may  in-  .  Mutual 
elude  in  their  deductions  from  gross  income  amounts  repaid 
to  policyholders  on  account  of  premiums  previously  paid 
by  them  and  interest  paid  upon  such  amounts  between  the 
ascertainment  thereof  and  the  payment  thereof,  such 
amounts  and  interest  having  been  included  in  gross  income. 


ART.  100.  Life  insurance  companies  are  authorized  to 
omit  from  gross  income  such  portion  of  any  actual  premium  ibi,  when 
received  from  any  individual  policyholder  as  shall  have  been 
paid  back  or  credited  to  the  policyholder  or  treated  as  an 
abatement  of  his  premium.  In  so  far  as  "deferred  divi- 
dends" payable  at  a  stated  period  represent  "a  portion  of  any 
actual  premium  received,"  such  deferred  dividends  may  be 
included  in  the  amounts  to  be  omitted  from  gross  income 
for  the  year  in  which  they  were  actually  paid  back,  credited 
to  the  policyholder  or  applied  as  an  abatement  of  premium. 
In  the  case  of  dividends  credited  or  apportioned  annually 
to  the  policyholder,  only  the  aggregate  amount  so  actually 
credited  or  apportioned  during  the  premium-paying  period, 
and  not  any  accretions  thereto,  can  be  excluded  from  gross 

133 


income.  In  the  case  of  whole-life  or  five-year  distribution 
policies,  deferred  dividends  may  be  excluded  from  gross  in- 
come to  the  extent  that  they  are  paid  back,  or  credited  to> 
the  insured,  or  used  as  an  abatement  of  his  annual  pre- 
miums. 


Gross 

c 

elude  what. 


ART.  101.  Gross  income  of  insurance  companies,  as  de- 
-  fined  above,  will  include  net  premium  income  as  reported 
to  tjie  State  insurance  departments,  except  the  foregoing 
items  specifically  exempted  in  the  act,  and,  in  the  case  of 
life  insurance  companies,  surrender  values  applied  in  any 
manner,  consideration  for  supplementary  contracts  involving 
and  not  involving  life  contingencies,  and  all  other  income, 
gains,  or  profit  as  shown  by  the  books  of  account. 


Consideration 

for      supplemen- 

tary  contracts, 


ART.  102.    Applied  surrender  values  and  consideration  for 

,  .......  .  . 

supplementary  contracts  not  involving  lite  contingencies  in- 
cluded in  income  will,  of  course,  be  deducted  as  payments 
under  policy  contracts,  but  for  convenience  in  verifying  the 
returns,  these  items  should  appear  in  the  return  in  both 
gross  income  and  deductions. 


company 


^3.  ^  insurance  companies  should  include  and 
attach  to  their  returns  a  supplementary  statement  showing, 
for  life  companies,  the  aggregate  of  items  "of  such  portion 
of  any  actual  premium  received  from  any  individual  policy- 
holder  as  shall  have  been  paid  back  or  credited  to  such  in- 
dividual policyholder,  or  treated  as  an  abatement  of  pre- 
mium of  such  individual  policyholder  within  such  year;" 
in  the  case  of  mutual  fire  insurance  companies  a  statement 
showing  "any  portion  of  the  premium  deposits  returned  to 
their  policyholders  ;"  and  in  the  case  of  mutual  marine  com- 
panies "amounts  repaid  to  policyholders  on  account  of  pre- 
miums previously  paid  by  them,  and  interest  paid  upon  such 
amounts  between  the  ascertainment  thereof  and  the  pay- 
ment thereof,"  which  are,  or  may  be,  omitted  from  gross  in- 
come. (For  authorized  deductions,  on  account  of  losses, 
etc.,  see  Arts.  113  and  147.) 


Gross   income 

of      manuiactur- 

ing  companies, 


ART.    104.      Gross   income   of   manufacturing1  companies 

,  . 

shall  consist  of  the  total  sales  of  manufactured  goods  dur- 
ing the  year  covered  by  the  return,  increased  or  decreased 
by  the  gain  or  loss  as  shown  by  the  inventories  of  finished 
and  unfinished  products,  raw  material,  etc.,  at  the  beginning 
and  end  of  the  year.  To  this  amount  should  be  added  the 
income,  gains,  or  profits  from  all  other  sources  as  shown  by 
the  books  of  account. 


134 


ART.   105.     Gross  income  of  mercantile  companies  shall     .Gross   income 

-11         ,  «  ,          ,.  ,  -       .  •*  .          ofmerca  ntile 

include  the  total  merchandise  sales  during  the  year,  in-  corporations, 
creased  or  decreased  by  the  gain  or  loss  as  shown  by  the 
inventories  of  merchandise  at  the  beginning  and  end  of  the 
year  for  which  the  return  is  made;  to  this  amount  should 
be  added  the  income,  gains,  or  profits  derived  from  all  other 
sources  as  shown  by  the  books  of  account. 


ART.  106.  Gross  income  of  miscellaneous  corporations 
consists  of  the  total  revenue  derived  from  the  operation 
and  management  of  the  business  and  property  of  the  cor- 
poration making  the  return,  together  with  all  amounts  of 
income,  including  the  income,  gains,  or  profits  from  all  other 
sources  as  shown  by  the  books  of  account. 


Gross   income 
"16 


ART.  107.    It  will  be  noted  from  these  definitions  that  the      Definition    of 
gross  income  embraces  not  only  the  operating  revenues,  but   gr°l 
also  income,  gains,  or  profits  from  all  other  sources,  such 
as    rentals,    royalties,    interest,    and   dividends    from    stock 
owned  in  other  corporations,  and  appreciation  in  values  of 
assets,  if  taken  upon  on  the  books  of  account  as  gain;  also 
profits  made  from  the  sale  of  assets,  investments,  etc. 


ART.  108.    For  the  purpose  of  determining  the  income  re-   ,  income  derived 

,       r       i  from  sale  of  cap- 

sultmg  from  the  sale  of  capital  assets  and  the  amount  to  be  itai  assets, 
accounted  for  as  income  under  this  act,  there  shall  be  in- 
cluded any  and  all  profit  resulting  from  such  sale  and  which 
may  be  apportioned  to  the  period  during  which  the  cor- 
poration tax  law  (sec.  38,  act  of  Aug.  5,  1909)  was  in  force 
and  effect,  which  was  not  returned  as  income  during  that 
period. 


ART.  109.     In  ascertaining  net  income  derived  from  the      A  s  c  e  rtaining 
sale  of  capital  assets,  if  such  assets  were  acquired  subse-   "he  sale™?  cap? 
quent  to  January  1,  1909,  the  difference  between  the  selling   tal  assets. 
price  and  the  buying  price  shall  constitute  an  item  to  be 
added   to  or  subtracted   from  gross  income  according    to 
whether  the  selling  price  was  greater  or  less  than  the  buying 
price.     If  the  capital  assets  were  acquired  prior  to  January 
1,  1909,  the  amount  of  profit  or  loss  representing  the  differ- 
ence between  the  selling  and  buying  price  is  to  be  prorated 
to  determine  the  proportion  of  the  gain  or  loss  arising  sub- 
sequent to  January  1,  1909,  and  the  proportionate  part  be- 
longing to  the  years  subsequent  to  January  1,  1909,  shall  be 
added  to  or  deducted  from  the  gross  income  for  the  year  in 
which  the  sale  was  made. 

135 


'from  ^he  ART-  ^^'  For  the  PurPose  of  determining  the  profit  or 
sale  of  such  loss  arising  from  the  sale  of  such  assets,  there  shall  be 
added  to  the  price  actually  realized  from  the  sale  any 
amount  which  has  heretofore  been  set  aside  and  deducted 
from  gross  income  by  way  of  depreciation  since  January  lr 
1909,  which  has  not  been  paid  out  in  making  good  such  de- 
preciation on  the  property  sold. 

book  avafues  o?  ART-  H1-  In  the  case  of  changes  in  book  values  of  capi- 
assets.  tal  assets  resulting  from  a  reappraisal  of  property,  the  con- 

sequent gains  or  losses  shall  be  computed  for  the  return  in 
the  manner  prescribed  above  in  the  case  of  the  sale  of  capital 
assets. 

^n  cases  wherein  there  is  an  annual  adjustment  of  book 
va^ues  °^  securities,  real  estate  and  like  assets,  and  the  in- 
creases and  decreases  in  values,  thus  indicated,  are  taken 
up  on  the  books  and  reflected  in  the  profit  and  loss  account, 
such  readjusted  values  will  be  taken  into  account  in  making 
the  return  of  annual  net  income  and  no  prorating  will  be  re- 
quired. If  such  adjustment  had  been  made  annually  prior 
to  March  1,  1913,  the  book  value  of  the  assets  at  that  date 
will  be  taken  as  the  basis  for  determining  gain  or  loss  re- 
sulting from  subsequent  sale,  maturity,  or  adjustment.  The 
adjustment  referred  to  will  comprehend  assets  which  have 
increased  in  value  as  well  as  those  which  have  decreased. 

rattonsreare°ren-  ART.  112.  Where  a  corporation  is  engaged  in  carrying 
f*fndonlncia?s°of  on  more  t^ian  °ne  c^ass  of  business,  gross  income  derived 
bulriness!  c  from  the  different  classes  of  business  shall  be  ascertained  ac- 

cording to  the  definitions  above,  and  which  are  applicable 
thereto. 

how  aJceSSnSdl  ART.  H3.  The  net  income  shall  be  ascertained  by  de- 
ducting from  the  gross  amount  of  the  income  of  such  cor- 
poration received  within  the  year  from  all  sources : 

First-  A11  the  ordinary  and  necessary  expenses  paid 
within  the  year  in  the  maintenance  and  operation  of  its 
business  and  properties,  including  rentals  or  other  payments 
required  to  be  made  as  a  condition  to  the  continued  use  or 
possession  of  property. 

tsh|tayeard  Second.  All  losses  actually  sustained  within  the  year 
and  not  compensated  by  insurance  or  otherwise,  including 
a  reasonable  allowance  for  depreciation  by  use,  wear  and 
tear  of  property,  if  any,  and  in  the  case  of  mines,  a  rea- 
Depreciation.  sonable  allowance  for  depletion  of  ores  and  all  natural  de- 
posits, not  to  exceed  5  per  centum  of  the  gross  value  at  the 
mine  of  the  output  for  the  year  for  which  the  computation 

136 


is  made ;  and  in  the  case  of  insurance  companies,  the  net  ad- 
dition, if  any,  required  by  law  to  be  made  within  the  year 
to  reserve  funds,  and  the  sums  other  than  dividends  paid 
within  the  year  on  policy  and  annuity  contracts,  except  as 
provided  in  the  cases  of  mutual  fire,  mutual  marine,  and 
life  insurance  companies. 


Third.  The  amount  of  interest  accrued  and  paid  within 
the  year  on  its  indebtedness  to  an  amount  of  such  indebted- 
ness not  exceeding  one-half  of  the  sum  of  its  interest- 
bearing  indebtedness  and  its  paid-up  capital  stock  out- 
standing at  the  close  of  tfce  year,  or  if  no  capital  stock,  on 
the  amount  of  its  indebtedness  not  exceeding  the  amount  of 
capital  employed  in  the  business  at  the  close  of  the  year: 
Provided,  That  in  case  of  indebtedness  wholly  secured  by 
collateral  the  subject  of  sale  in  ordinary  business  of  such 
corporation,  joint-stock  company,  or  association,  the  total 
interest  secured  and  paid  by  such  company,  corporation,  or 
association  within  the  year  on  any  such  indebtedness  may 
be  deducted  as  a  part  of  its  expense  of  doing  business: 
Provided  further,  That  in  the  case  of  bonds  or  other  in- 
debtedness, which  have  been  issued  with  a  guaranty  that 
the  interest  payable  thereon  shall  be  free  from  taxation,  no 
deduction  for  the  payment  of  the  tax  herein  imposed  shall 
be  allowed;  and  in  the  case  of  a  bank,  banking  association, 
loan,  or  trust  company,  interest  paid  within  the  year  on 
deposits  or  on  moneys  received  for  investment  and  secured 
by  interest-bearing  certificates  of  indebtedness  issued  by 
such  bank,  banking  association,  loan,  or  trust  company. 


Interest 
accrued  and  paid 
within  the  year. 


Interest  on  in- 
debtedness se- 
cured by  collat- 
eral. 


Tax  paid  on 
guaranteed 
bonds  not  de- 
ductible. 


Fourth.    All  sums  paid  within  the  year  for  taxes  imposed      Taxes    paid 
under  the  authority  of  the  United  States,  or  any  State  or   " 
Territory  thereof,  or  imposed  by  the  government  of  any 
foreign  country. 

ART.  114.     Expenses  of  operation  and  maintenance  shall       General  ex- 
include  all  expenditures  for  material,  labor,  fuel,  and  other   Penses- 
items  entering  into  the  cost  of  the  goods  sold  or  inventoried 
at  the  end  of  the  year,  and  all  other  expenses  incurred  in 
the  operation  of  the  business  except  such  as  are  required  by 
the  act  to  be  segregated  in  the  return. 


ART.  115.  The  cost  of  erecting  permanent  buildings  on 
ground  leased  by  a  company  is  a  proper  deduction  as  a 
rental  charge,  provided  such  buildings  are  left  on  the  ground 
at  the  expiration  of  the  lease  as  a  part  of  the  rental  payment. 
In  such  case  the  cost  will  be  prorated  according  to  the  num- 
ber of  years  constituting  the  term  of  the  lease  and  the  an- 
nual deduction  will  be  made  accordingly. 

137 


Cost  of  build- 
ings on  leased 
grounds. 


Expense,    for-       ART.   116.     General  expenses,  such  as  coal,  ship  stores, 

eign      steamship  .....  ...  r  .  1111  i 

companies.  etc.,  of  foreign  steamship  companies,  shall  be  prorated  as 

provided  in  the  act  for  interest  deductions  in  the  case  of 
foreign  corporations. 


n  si  aid       ART-  117.     Commissions  allowed  salesmen,  paid  in  stock, 
in  stokn          may  be  deducted  as  expense  if  so  charged  on  books  at  the 
actual  value  of  such  stock. 


betterments. 


Additions  and  ART.  118.  Amounts  expended  in  additions  and  better- 
ments which  constitute  an  increase  in  capital  investment  are 
not  a  proper  deduction. 


Compensation       ART.  119.     Amounts  paid  as  compensation  or  additional 

based    on   stock-  .  .    . 

holding  not  de-  compensation  to  officers  or  employees,  which  amounts  are 
based  upon  the  stockholdings  of  such  officers  or  employees, 
are  held  to  be  dividends,  and  although  paid  in  lieu  of  sal- 
aries or  wages,  are  not  allowable  deductions  from  gross  in- 
come, for  the  reason  that  dividends  are  not  deductible. 


onsifor8'  ratal-  ART.  120.  Amounts  paid  for  pensions  to  retired  em- 
des^not  deduct-  ployees,  or  to  their  families,  or  others  dependent  upon  them, 
or  on  account  of  injuries  received  by  employees,  are  proper 
deductions  as  "ordinary  and  necessary  expenses";  gifts  or 
gratuities  to  employees  in  the  service  of  a  corporation  are 
not  properly  deductible  in  ascertaining  net  income. 


which  n  are1  °<?e-       ART.  121.     Donations  made  for  purposes  connected  with 
ductibie.  '  the  operation  of  the  property  when  limited  to  charitable  in- 

stitutions, hospitals,  or  educational  institutions,  conducted 
for  the  benefit  of  its  employees,  or  their  dependents,  shall 
be  a  proper  deduction  for  ordinary  and  necessary  expenses. 

for  ART.  122.  Funds  set  aside  by  a  corporation  for  insuring 
its  own  property  are  not  a  proper  deduction,  but  any  loss 
actually  sustained  and  charged  to  such  fund  may  be  de- 
ducted. 


^Materials  and  ART.  123.  In  ascertaining  expenses  proper  to  be  included 
in  the  deductions  to  be  made  under  the  item  of  "Expenses," 
corporations  carrying  materials  and  supplies  on  hand  for 
use  should  include  in  such  expenses  the  charges  for  ma- 
terials and  supplies  only  to  the  amount  that  the  same  are 
actually  disbursed  and  used  in  operation  and  maintenance 
during  the  year  for  which  the  return  is  made. 

138 


ART.  124.     The  deduction  for  losses  must  be  losses  ac-      Losses  sus- 

,,  ,      ,       .  «  ,  «    ,         tamed  during 

tually  sustained  during  the  year  and  not  compensated  .by  the  year, 
insurance  or  otherwise.  It  must  be  based  upon  the  differ- 
ence between  the  cost  value  and  salvage  value  of  property 
or  assets,  including  in  the  latter  value  such  amount,  if  any, 
as  has,  in  the  current  or  previous  years,  been  set  aside  and 
deducted  from  gross  income  by  way  of  depreciation,  as 
elsewhere  defined,  and  has  not  been  paid  out  in  making  good 
such  depreciation. 


ART.   125.     Bad  debts,  if  so  charged  off  the  company's   chargded  dff.bts 
books,  during  the  year,  are  proper  deductions.     But  such 
debts,  if  subsequently  collected,  must  be  treated  as  income. 


ART.  126.    Reserves  to  take  care  of  anticipated  or  prob-    .  ?ese.™es  n  ° t 

111  1     j       .  •          c  •  deductible. 

able  losses  are  not  a  proper  deduction  from  gross  income. 


ART.  127.  Loss  due  to  voluntary  removal  of  buildings,  r  L™*  vd&^ e  *° 
etc.,  incident  to  improvements  is  either  a  proper  charge  to  buildings, 
the  cost  of  new  additions  or  to  depreciation  already  pro- 
vided, as  the  facts  may  indicate,  but  in  no  case  is  it  a  proper 
deduction  in  determining  net  income,  except  as  it  may  be  re- 
flected in  the  reasonable  amount  allowable  as  a  deduction  for 
depreciation  of  the  new  building.  Any  loss  claimed  because 
of  the  voluntary  removal  of  a  building  is  presumed  to  have 
been  covered  by  previous  depreciation  charges;  otherwise 
the  amount  of  such  loss  will  constitute  a  part  of  the  cost  of 
the  new  building. 


ART.  128.    All  losses  claimed  arising  from  sale  of  capital   sjfss^s 
assets  should  be  'arrived  at  in  the  manner  prescribed  in  arti-   assets, 
cle  109,  defining  gains  arising  from  sale  of  capital  assets. 


ART.  129.     The  deduction  for  depreciation  should  be  the      D^p  reciation 
estimated  amount  of  the  loss,  accrued  during  the  year  to 
which  the  return  relates,  in  the  value  of  the  property  in 
respect  of  which  such  deduction  is  claimed,  that  arises  from 
exhaustion,  wear  and  tear,  or  obsolescence  out  of  the  uses 
to  which  the  property  is  put,  and  which  loss  has  not  been 
made  good  by  payments  for  ordinary  maintenance  and  re- 
pairs deducted  under  the  heading  of  expenses  of  mainte-       Depreciation, 
nance  and  operation.    This  estimate  should  be  formed  upon  how  d 
the  assumed  life  of  the  property,  its  cost,  and  its  use.    Ex- 
penses paid  in  any  one  year  in  making  good  exhaustion, 
wear  and  tear,  or  obsolescence  in  respect  of  which  any  de- 
duction for  depreciation  is  claimed  must  not  be  included  in 
the  deduction  for  expense  of  maintenance  and  operation  of 

139 


the  property,  but  must  be  made  out  of  accumulated  allow- 
ances, deducted  for  depreciation  in  current  and  previous 
years. 

de?uctFbie,daho°w       ART-  13°-     The  depreciation  allowance,  to  be  deductible, 
treated.  must  be,  as  nearly  as  possible,  the  measure  of  the  loss  due 

to  wear  and  tear,  exhaustion,  and  obsolescence,  and  should 
be  so  entered  on  the  books  as  to  constitute  a  liability  against 
the  assets  of  the  company,  and  must  be  reflected  in  the  an- 
nual balance  sheet  of  the  company.  The  annual  allowance 
deductible  on  this  account  should  be  such  an  amount  as  that 
the  aggregate  of  the  annual  allowances  deducted  during  the 
life  of  the  property,  with  respect  to  which  it  is  claimed,  will 
not,  when  the  property  is  worn  out,  exhausted,  or  obsolete, 
exceed  its  original  cost. 

Pa?rns?idellt*1  re"  ART-  131-  Incidental  repairs  which  neither  add  to  the 
value  of  the  property  nor  appreciably  prolong  its  life,  but 
keep  it  in  an  operating  condition,  may  be  deducted  as  ex- 
penses. 

Depreciation  ART.  132.  Depreciation  set  up  on  the  books  and  deducted 
from  gross  income  cannot  be  used  for  any  purpose  other 
than  making  good  the  loss  sustained  by  reason  of  the  wear 
and  tear,  exhaustion,  or  obsolescence  of  the  property  with 
respect  to  which  it  was  claimed.  If  it  develops  that  an 
amount  has  been  reserved  or  deducted  in  excess  of  the  loss 
by  depreciation,  the  excess  shall  be  restored  to  income  and 
so  accounted  for. 

Diversion    of      ART.  133.     If  any  portion  of  the  depreciation  set  up  is 
depredate   re-  Diverted  to  any  purpose  other  than  making  good  the  loss 
sustained  by  reason  of  depreciation,  the  income  account  for 
the  year  in  which  such  diversion  takes  place  must  be  cor- 
respondingly increased. 

Shrinkage  in  ART.  134.  Depreciation  in  book  values  of  capital  assets 
shall  be  treated  in  the  return  in  the  manner  prescribed  in 
the  case  of  loss  from  the  sale  of  capital  assets  (art.  109), 
but  amounts  arbitrarily  charged  off  will  not  be  allowed  as 
deductions  except  so  far  as  they  represent  an  actual  shrink- 
age in  values  which  may  be  determined  to  have  taken  place 
during  the  year  for  which  the  return  is  made. 

ART.  135.  Where  a  corporation  holds  bonds  which  were 
purchased  at  a  rate  above  par  and  said  corporation  shall  pro- 
portionately reduce  the  value  of  those  bonds  on  its  books 
each  year  so  that  the  book  value  shall  be  the  redemption 
value  of  the  bonds  when  such  bonds  become  due  and  payable, 
the  return  of  annual  net  income  of  the  corporation  holding 

140 


such  bonds  may  show  the  depreciation  on  account  of  amor- 
tization of  such  bonds.  The  requirement  is,  however,  that 
the  amount  carried  to  the  amortization  account  each  year 
shall  be  equitably  proportioned  with  respect  to  the  difference 
between  the  purchase  price  and  the  maturing  value  and  the 
number  of  years  to  elapse  until  the  bonds  become  due  and 
payable.  With  respect  to  bond  issues  where  such  bonds  are 
disposed  of  for  a  price  less  than  par  and  are  redeemable  at 
par,  it  is  also  held  that  because  of  the  fact  that  such  bonds 
must  be  redeemed  at  their  face  value,  the  loss  sustained  by 
reason  of  their  sale  for  less  than  their  face  value  may  be 
prorated  by  the  issuing  corporation  in  accordance  with  the 
life  of  the  bond. 


Am  o  r  tizatioH 
of  bonds. 


Loss  to  be  pro- 
rated. 


ART.  136.  "Good  will"  represents  the  value  attached  to 
a  business  over  and  above  the  value  of  the  physical  prop- 
erty, and  is  such  an  entirely  intangible  asset  that  no  claim 
for  depreciation  in  connection  therewith  can  be  allowed. 


Good  will. 


ART.  137.    An  allowance  for  depreciation  of  patents  will 
be  made  on  the  following  basis : 


D  e  p  reciatioa 
on  patents. 


The  deduction  claimed  for  exhaustion  of  the  capital 
assets  as  represented  by  patents  to  be  made  in  the  return  of 
annual  net  income  of  a  corporation  for  any  given  year  shall 
be  one-seventeenth  of  the  actual  cost  of  such  patents  reduced 
to  a  cash  basis.  Where  the  patent  has  been  secured  from 
the  Government  by  a  corporation  itself,  its  cost  would  be 
represented  by  the  various  Government  fees,  cost  of  draw- 
ings, experimental  models,  attorneys'  fees,  etc.  Where  the 
patent  has  been  purchased  by  the  corporation  for  a  cash  con- 
sideration, the  amount  would  represent  the  cost.  Where  the 
corporation  has  purchased  a  patent  and  made  payment  there- 
for in  stocks  or  other  securities,  the  actual  cash  value  of  such 
stocks  or  other  securites  at  the  time  of  the  purchase  will 
represent  the  cost  of  the  patent  to  the  corporation. 


H  o  w      deter- 
mined. 


ART.  138.     With  respect  to  the  depreciation  of  patents,      Deduction 
one-seventeenth  of  the  cost  is  allowable  as  a  proper  deduc-   Snce°of 
tion  each  year  until  the  cost  of  the  patent  has  been  returned 
to  the  corporation.     Where  the  value  of  a  patent  has  dis- 
appeared through  obsolescence  or  any  other  cause  and  the 
fact  has  been  established  that  the  patent  is  valueless,  the  un- 
returned  cash  investment  remaining  in  the  patent  may  be 
claimed  as  a  total  loss  and  be  deducted  from  gross  income  in 


141 


the  return  of  annual  net  income  for  the  year  during  which 
the  facts  as  to  obsolescence  or  loss  shall  be  established, 
such  unreturned  cash  value  to  be  fixed  in  accordance  with 
the  proportion  that  the  number  of  years  which  the  patent 
still  has  to  run  bears  to  the  full  patent  period  of  17  years. 


D  e  p  reciation 
of    timber    land. 


ART.  139.  Corporations  owning  tracts  of  timber  lands 
and  removing  therefrom  and  selling,  or  otherwise  disposing 
of  the  timber  will  be  permitted  to  deduct  from  their  gross  in- 
come on  account  of  depreciation  or  depletion  an  amount  rep- 
resenting the  original  cost  of  such  timber,  plus  any  carrying 
charges  that  may  have  been  capitalized  or  not  deducted  from 
income.  The  purpose  of  the  depreciation  or  depletion  de- 
duction is  to  secure  to  the  corporation,  when  the  timber  has 
been  exhausted,  an  aggregate  amount  which,  plus  the  salvage 
value  of  the  land,  will  equal  the  capital  actually  invested  in 
such  timber  and  land. 


Deductions    to 
cease,  when. 


ART.  140.  When  an  amount  sufficient  to  return  this  capi- 
tal has  been  secured  through  annual  depreciation  deduc- 
tions no  further  deduction  on  this  account  shall  be  allowed. 
For  the  purpose  of  increasing  the  deduction  on  this  account 
no  arbitrary  increase  in  values  shall  be  made,  unless  such 
increase  in  value  shall  be  returned  as  income  for  the  year 
in  which  the  increase  in  value  was  taken  up  on  the  books. 


D  e  p  reciation 
of  natural  depos- 
its. 


ART.  141.  The  depreciation  of  "coal,  iron,  oil,  gas  and  all 
other  natural  deposits  must  be  based  upon  the  actual  cost  of 
the  properties  containing  such  deposits.  In  no  case  shall 
the  annual  deduction  on  this  account  exceed  5  per  cent  of 
the  gross  value  at  the  mine  (well,  etc.)  of  the  output  for  the 
year  for  which  the  computation  is  made. 


Definition  of 
•'gross  value"  at 
the  mine. 


ART.  142.  The  term  "gross  value  at  the  mine,"  as  used  in 
paragraphs  B  and  G  of  section  2  of  the  act  of  October  3, 
1913,  prescribing  a  limit  to  the  amount  which  may  be  de- 
ducted in  the  return  of  individuals  and  corporations  as  de- 
preciation in  the  case  of  mines,  is  held  to  mean  the  market 
value  of  ore,  coal,  crude  oil,  and  gas  at  the  mine  or  well, 
where  such  value  is  established  by  actual  sales  at  the  mine  or 
well ;  and  in  case  the  market  value  of  the  product  of  the  mine 
or  well  is  established  at  some  place  other  than  at  the  mine 
or  well,  or  on  the  basis  of  the  bullion  or  metallic  value  of 
the  ore,  then  the  gross  value  at  the  mine  is  held  to  be  the 
value  of  the  ore,  coal,  oil,  or  gas  sold,  or  of  the  metal  pro- 
duced, less  transportation,  reduction,  and  smelting  charges. 

142 


If  the  rate  of  5  per  cent  per  annum  shall  return  to  the   ti0^att0of ^re- 
corporation  its  capital  investment  prior  to  the  exhaustion  duced,  when, 
of  the  deposits,  the  rate  on  which  the  annual  deduction  for 
depletion  of  deposits  is  based  must  be  lowered  in  accordance 
with  the  estimated  number  of  years  it  will  take  to  exhaust 
the  estimated  reserves. 

In  case  the  reserves  shall  be  in  excess  of  the  estimates,  no      Deduction    to 
further  deduction  on  account  of  depletion  shall  be  made   cease>  when- 
where  the  capital  investment  has  been  returned  to  the  cor- 
poration. 

ART.  143.     In  addition  to  the  deduction  to  measure  the      Depreciation 
loss  due  to  depletion,  the  corporation  will  be  allowed  the   of  plant'  etc< 
usual  depreciation  of  its  machinery,  equipment,  etc.,  such 
depreciation  to  be  determined  on  the  basis  of  the  cost  and 
estimated  life  of  the  property  with   respect  to  which  the 
depreciation  is  claimed. 

ART.  144.     Corporations  leasing  oil  or  gas  territory  shall      Corporations 
base  their  depletion  deduction  upon  the  cost  of  the  lease,  and   geaass.ing 
not  upon  the  estimated  value,  in  place,  of  the  oil  or  gas. 


ART.  145.  Corporations  operating  mines  (including  oil  Corporations 
or  gas  wells)  upon  a  royalty  basis  only  can  not  claim  depre-  °Peratmg  mines, 
ciation  because  of  the  exhaustion  of  the  deposits. 


ART.   146.     Unearned  increment  will  not  be  considered 
in  fixing  the  value  on  which  depreciation  shall  be  based. 


Unearned     in- 
crement. 


ART.  147.     (a)  Under  item  5  (a)  of  the  return  form,  the   ,  Deduction    of 

,    ,  j'j_.f  11    i  11        losses,    deprecia- 

msurance  company  may  take  credit  for  all  losses  actually    tion,    payments 
sustained  during  the  year  and  not  compensated  by  insurance   ?r"cts°byy  insur- 
er otherwise,   including  losses   resulting  from  the  sale  or   ance  companies, 
maturity  of  securities  or  other  assets,  as  well  as  decreases  by 
adjustment  of  book  values  of  securities,  in  so  far  as  such 
decreases   represent  actual  declines  in  values  which  have 
taken  place  during  the  year  for  which  the  return  is  made ; 
also  losses  from  agency  balances,  or  other  accounts,  charged 
off   as   worthless ;    losses  by   defalcation ;    premium   notes 
voided  by  lapse,  when  such  notes  shall  have  been  included 
in  gross  income.    This  item  will  not,  however,  include  pay- 
ments on  policy  contracts. 

(£>)   In  this  item  may  be  deducted  actual  losses  sustained       Losses   by 
within  the  year  by  reason  of  the  depreciation  of  property,   value n  of a  ^op" 
which  shall  have  been  so  entered  on  the  books  of  the  com-   erty- 
pany  as  to  constitute  a  liability  against  its  assets.    An  arbi- 
trary depreciation  deduction  claimed  in  the  return,  but  not 
evidenced  by  book  entry,  can  not  be  allowed. 

143 


tracts1  paid7  c°n"        (c)   In  this  *tem  cred^  wil1  J36  taken  for  a11  death,  dis- 
ability, or  other  policy  claims,  including  fire,  accident,  and 
liability  losses,   matured  endowments,  annuities,  payments 
on   installment   policies,   surrender   values,   and  all   claims 
actually  paid  under  the  terms  of  policy  contracts.     Salvage 
need  not  be  included  in  gross  income  if  deducted  in  ascer- 
taining the  net  amount  paid  for  losses  under  policy  con- 
Losses    in-  tracts.      Reserves   covering   liabilities    for   losses   incurred, 
pairdenotadedtIS-  reported,   resisted,   adjusted  or  unadjusted  but  not  paid, 
ible-  can  not  be  deducted  from  gross  income  under  this  or  any 

other  item  of  the  return. 


, 


W  The  reserve  funds  of  insurance  companies  to  be 
by  law,  how  de-  considered  in  computing  the  deductible  net  addition  to  re- 
serve funds  are  held  to  include  only  the  reinsurance  reserve 
and  the  reserve  for  supplementary  contracts  required  by  law 
in  the  case  of  life  insurance  companies,  the  unearned  pre- 
mium reserves  required  by  law  in  the  case  of  fire,  marine, 
accident  liability,  and  other  insurance  companies,  and  only 
such  other  reserves  as  are  specifically  required  by  the 
statutes  of  a  State  within  which  the  company  making  the 
return  is  doing  business.  The  reserves  used  in  computing 
the  net  addition  must  not  include  the  reserve  on  any  policies 
the  premiums  on  which  have  not  been  accounted  for  in 
gross  income.  For  the  purpose  of  this  deduction,  the  net 
addition  is  the  excess  of  the  reserve  at  the  end  of  the  year 
over  that  at  the  beginning  of  the  year  and  may  be  based 
upon  the  highest  authorized  reserve  required  by  any  State  in 
which  the  company  making  the  return  does  business. 


^n  ^e  case  °^  assessment  insurance  companies,  the  actual 
deposits  of  sums  with  the  State  or  Territorial  officers  pur- 
suant to  law,  as  additions  to  guaranty  or  reserve  funds, 
shall  be  treated  as  payments  required  by  law  to  reserve 
funds. 


Mutual  marine  insurance  companies  will  deduct  under 
item  5  (<?)  amounts  repaid  to  policyholders  on  account  of 
premiums  previously  paid  by  them  and  interest  paid  upon 
such  amounts  between  the  ascertainment  thereof  and  the 
payment  thereof. 


ART*    148'     The   amount  °*   interest  accrued  and  paid 
nterest   de-  within  the  year  by  a  corporation  on  an  amount  of  bonded 


or  other  indebtedness  not  in  excess  of  one-half  of  the  sum 
of  the  interest-bearing  indebtedness  and  the  paid-up  capital 

144 


stock  outstanding  at  the  close  of  the  year,  or,  if  no  capital 
stock,  on  the  amount  of  interest-bearing  indebtedness  not 
exceeding  the  amount  of  capital  employed  in  the  business 
at  the  close  of  the  year,  constitutes  an  allowable  deduction ; 
that  is,  the  maximum  principal,  upon  which  interest  for  the 
purpose  of  this  deduction,  can  be  computed  must  not  exceed, 
in  the  one  case,  one-half  of  the  sum  of  the  interest-bearing 
indebtedness  and  the  capital  stock  outstanding  at  the  close 
of  the  year,  or,  in  the  other  case,  must  not  exceed  the 
amount  of  capital  employed  in  the  business  at  the  close  of 
the  year.  The  interest  to  be  deductible  must  have  been 
computed  on  the  proper  principal  at  the  contract  rate  and 
must  have  been  actually  paid  within  the  year. 


Interest  paid  pursuant  to  contract  on   an  indebtedness       interest   paid 
secured  by  mortgage  or  real  estate  occupied  and  used  by   f^6111*1  deduct' 
a  corporation,  in  which  real  estate  the  corporation  has  no 
equity  or  to  which  it  is  not  taking  title  is  an  allowable  deduc- 
tion  from  gross  income  as  a  rental  charge,  payment  of 
which  is  required  to  be  made  as  a  condition  to  the  con- 
tinued use  and  possession  of  the  property.    If,  however,  the      interest      on 
corporation  has  an  equity  in  or  is  purchasing  for  its  own   mortgage  on  real 

J       ,  .   ,  •  •          estate    in    which 

use  the  real  estate  upon  which  such  mortgage  is  a  prior   corporation   has 
lien,  the  indebtedness  will  be  held  to  be  indebtedness  of   gSte."**    de~ 
the  corporation   within  the   meaning  of  the  law  and  the 
interest  paid  on  such  mortgage  will  be  deductible  only  to 
the  extent  that  it,  with  interest  on  other  obligations  of  the 
corporation,  is  within  the  limit  fixed  by  the  act. 


ART.  149.     In  the  case  of  banks  and  banking  associations,      Banks  and 
loan  or  trust  companies,  interest  paid  within  the  year  on   {fojj™*  associa- 
deposits,  or  on  moneys  received  for  investment  and  secured 
by   interest-bearing   certificates   of   indebtedness   issued  by 
such  bank,  banking  association,  loan  or  trust  company,  may 
be  allowably  deducted  from  the  gross  income  of  such  cor- 
porations. 


ART.  150.     Interest  paid  on  indebtedness,  wholly  secured      interest    paid 
by  collateral  the  subject  of  sale  in  ordinary  business  of  such   °n  indebtedness, 
corporations,  is  also  deductible  to  the  full  amount  of  such 
interest  paid.     This  contemplates  that  the  entire  interest 
received  on  the  collateral  securing  such  indebtedness  shall 
be  included  in  the  gross  income  returned. 

ART.    151.     Interest   on    bonded    or   other    indebtedness      Different  rates 
bearing  different  rates  of  interest  may  be  deducted  from   of  interest, 
gross    income    during    the    year,    provided    the    aggregate 

<%> 

145 


amount  of  such  indebtedness  on  which  the  interest  is  paid 
does  not  exceed  the  limit  prescribed  by  law,  and  in  case  the 
indebtedness  is  in  excess  of  the  amount  on  which  interest 
may  be  legally  deducted  the  indebtedness  bearing  the  highest 
rate  may  be  first  considered  in  computing  the  interest  de- 
duction and  the  balance,  if  any,  will  be  computed  upon 
the  indebtedness  bearing  the  next  lower  rate  actually  paid, 
and  so  on  until  interest  on  the  maximum  principal  allowed 
has  been  computed. 

Taxes  deduct-  ART.  152.  All  sums  paid  within  the  year  for  taxes  im- 
posed under  the  authority  of  the  United  States  or  of  any 
State  or  Territory  thereof,  or  imposed  by  the  government 
of  any  foreign  country,  are  deductible  from  gross  income. 


Taxes  not  de- 
ductibie. 


ART.  153.  Taxes  paid  for  local  benefits  are  not  deduct- 
Taxes  paid  by  a  corporation  pursuant  to  a  contract 
guaranteeing  that  the  interest  payable  on  its  bonds  or  other 
indebtedness  shall  be  free  from  taxation  are  not  deductible. 


Tax  on  capital  ART.  154.  Banks  paying  taxes  assessed  against  their 
stock  of  bank*,  stockholders  because  of  their  ownership  of  the  shares  of 
stock  issued  by  such  banks  can  not  deduct  the  amount  of 
taxes  so  paid  in  making  their  return  for  the  income  tax 
imposed  by  this  act  unless  specially  authorized  to  do  so 
by  the  laws  of  the  State  in  which  they  do  business.  The 
shares  of  stock  are  the  property  of  the  stockholders,  and 
such  holders  are  primarily  liable  for  the  tax. 

import  duties.'  ART.  155.  Import  duties  or  taxes  are  not  deductible 
under  the  item  of  taxes  paid  during  the  year,  but  should  be 
included  in  arriving  at  the  cost  of  goods  under  item  No.  4 
(expenses). 


Reserves    for 


ART.  156.  Reserves  for  taxes  can  not  be  allowed,  as  the 
law  specifically  provides  that  only  such  sums  as  are  paid 
within  the  year  for  taxes  shall  be  deducted. 


Foreign  corpo-  ART.  157.  Foreign  corporations  shall  be  subject  to  the 
toTax8  subject  normal  tax  of  1  per  cent  computed  upon  the  net  income 
received  by  or  accruing  to  such  corporations  from  busi- 
ness transacted  and  capital  invested  in  this  country.  For 
the  purpose  of  the  tax  the  net  income  of  such  foreign 
organizations  shall  be  ascertained  by  deducting  from  the 
gross  income  arising,  received,  or  accruing  from  business 
done  and  capital  invested  in  this  country  the  deductions 
enumerated  in  the  act,  which  deductions  shall  be  limited 

Deductions   to  expenditures  or  charges  actually  incurred  in  the  main- 
con  fined    to    ex-  ,  *?    ,       ,        .  J 

ncnses   of  busi-  tenance  and  operation  01  the  business  transacted  and  capi- 
remted°nstiteshe   tal  invested  in  the  United  States  or,  as  to  certain  charges, 

146 


such  proportion  of  the  aggregate  charges  as  the  gross  in- 
come from  business  done  and  capital  invested  in  the  United 
States  bears  to  the  aggregate  income  within  and  without 
the  United  States.  In  other  words,  the  deductions  from 
the  gross  income  of  a  foreign  corporation  doing  business  in 
this  country  should,  as  nearly  as  possible,  represent  the 
actual  expenses  and  authorized  charges  incident  to  the  busi- 
ness done  and  capital  invested  in  this  country  and  must  not 
comprehend,  either  directly  or  indirectly,  any  expenditures 
or  charges  incurred  in  the  transaction  of  business  or  the 
investment  of  capital  without  the  United  States. 


ART.  158.  It  is  immaterial  whether  the  deductions  except  HOW  deduc- 
for  taxes  and  losses  are  evidenced  by  actual  disbursements  *^|nc|5a11  be 
in  cash,  or  whether  evidenced  in  such  other  way  as  to  be 
properly  acknowledged  by  the  corporate  officers  and  so 
entered  on  the  books  of  the  corporation  as  to  constitute  a 
liability  against  the  assets  of  the  corporation  making  the 
return.  Deductions  for  taxes,  however,  should  be  the  aggre- 
gate of  the  amounts  actually  paid,  as  shown  on  the  cash 
book  of  the  corporation.  Deductions  for  losses  should  be 
confined  to  losses  actually  sustained  and  charged  off  dur- 
ing the  year  and  not  compensated  by  insurance  or  other- 
wise. Except  as  the  same  may  be  modified  by  the  pro- 
visions of  the  act,  limiting  certain  deductions  and  author- 
izing others,  the  net  income  as  returned  for  the  purpose  of 
the  tax  should  be  the  same  as  that  shown  by  the  books 
or  the  annual  balance  sheet. 


ART.    159.     The  tax   imposed  upon  the  income  of   cor-   .  Tax    on    net 
porations,  whether  domestic  or  foreign,  shall  be  computed   StSSs  °for°rfhe 
upon  the  net  income,  ascertained  in  the  manner  hereinbefore   year  1913- 
indicated,   except  that  for  the  year  ending  December  31, 
1913,  the  income  tax  will  be  imposed  upon  the  net  income 
accrued  from  March   1  to  December  31,  both  dates  inclu- 
sive, and  such  amount  of  net  income  is  ascertained  by  tak- 
ing five-sixths  of  the  entire  net  income  for  said  calendar 
year. 


ART.  160.     The  special  excise  tax  on  corporations  pro-      Special  excise 
vided  for  in  the  act  of  August  5,  1909,  is  reaffirmed  and   Jf0xnson  corP°ra' 
made  operative  and  effective  as  to  the  period  from  January 
1   to  February  28,   1913,  both  dates  inclusive,  which  said 
tax   shall   be  computed  upon  one-sixth   of   the  entire   net 
income  of   said   corporations    for   said  year,   and   the  net 
income   shall  be  ascertained   in  accordance  with   the  pro- 
visions of  the  income-tax  law. 

147 


Return    and       por  the  year  1913  it  shall  be  necessary  to  make  but  one 

assessment.  t<f  ,  .,  J      ,    .        , 

return  and  assessment  for  all  taxes  imposed  in  the  income- 
tax  law  upon  corporations,  either  by  way  of  income  or 
excise,  which  return  and  assessment  shall  be  made  at  the 
times  and  in  the  mariner  provided  in  section  2  of  the  act 
of  October  3,  1913. 

NO  specific  ex-       Under  the  present  law,  no  specific  exemption  is  allow - 

abie'aTa  deduc-  a^e>  as  was  tne  case  under  the  corporation-tax  law;   hence 

tion.  the  assessment  will  be  based  upon  the  entire  net  income 

of  the  corporation  arising  or  accruing  to  it  from  all  sources 

during  the  entire  year  for  which  the  return  is  made. 

inventories.  ART.  161.     In  order  that  certain  classes  of  corporations 

may  arrive  at  their  correct  income,  it  is  necessary  that  an 
inventory,  or  its  equivalent,  of  materials,  supplies,  and  mer- 
chandise on  hand  for  use  or  sale  at  the  close  of  each  calen- 
dar year  shall  be  made  in  order  to  determine  the  gross 
income  or  to  determine  the  expense  of  operation. 

Physical     in-       A  physical  inventory  is  at  all  times  preferred,  but  where 
ltory*  a  physical  inventory  is  impossible,  and  an  equivalent  inven- 

tory is  equally  accurate,  the  latter  will  be  acceptable. 

An  equivalent  inventory  is  an  inventory  of  materials, 
supplies,  and  merchandise  on  hand  taken  from  the  books 
of  the  corporation. 

Corporations,       ART.  162.     For  the  purpose  of  this  tax,  corporations  are 
classes  of.  divided  into  five  classes,  as  follows : 

Class  A.  Class  A.       Financial  and  commercial,  including  banks, 

banking  associations,  trust  companies,  guaranty  and  surety 
companies,  title  insurance  companies,  building  associations 
(if  for  profit),  and  insurance  companies  not  specifically  ex- 
empt. 

class  B.  Class  B.  Public  service,  such  as  railroad,  steamboat,  ferry- 

boat, and  stage-line  companies;  street-railway  companies; 
pipe-line,  gas-light,  and  electric-light  companies;  express 
companies,  telegraph  and  telephone  companies. 

class  c.  Class  C.     Industrial  and  manufacturing,  such  as  mining, 

oil  and  gas  producing  companies,  lumber  and  coke  com- 
panies; rolling  mills;  foundry  and  machine  shops;  saw- 
mills; flour,  woolen,  cotton,  and  other  mills;  manufac- 
turers of  cars,  automobiles,  elevators,  agricultural  imple- 
ments, etc. ;  manufacturers  or  refiners  of  sugar,  molasses, 

148 


sirups,  or  other  products ;  ice  and  refrigerating  companies ; 
slaughterhouse,  tannery,  packing,  or  canning  companies; 
printing  and  publishing  companies,  etc. 


Class  D.  Mercantile,  including  all  dealers  (not  otherwise 
classed  as  producers  or  manufacturers)  in  coal,  lumber, 
grain,  produce,  and  all  goods,  wares,  and  merchandise. 


Class  D. 


Class  E.  Miscellaneous,  such  as  architects,  contractors, 
hotel,  theater,  or  other  companies  or  associations  not  other- 
wise classified. 


Class  E. 


ART.  163.  Under  the  authority  conferred  by  this  act,  Form  of  return, 
forms  of  return  have  been  prescribed,  in  which  the  various 
items  specified  in  the  law  are  to  be  stated.  Blank  forms  of 
this  return  will  be  forwarded  to  collectors  and  should  be 
furnished  to  every  corporation,  not  expressly  exempted,  on 
or  before  January  1  of  each  year,  in  the  case  of  corporations 
making  their  returns  for  the  calendar  year,  or  on  or  before 
the  first  day  of  the  next  fiscal  year  in  the  case  of  corpora- 
tions making  returns  for  their  fiscal  year.  Failure  on  the 
part  of  any  corporation,  joint-stock  company,  association, 
or  insurance  company  liable  to  this  tax  to  receive  a  pre- 
scribed blank  form  will  not  excuse  it  from  making  the  re- 
turn required  by  law,  or  relieve  it  from  any  penalties  for 
failure  to  make  the  return  in  the  prescribed  time.  Corpora- 
tions not  supplied  with  the  proper  forms  for  making  the  re- 
turn should  make  application  therefor  to  the  collector  of  in- 
ternal revenue  in  whose  district  is  located  its  principal  place 
of  business  in  ample  time  to  have  its  return  prepared,  verified, 
and  filed  with  the  collector  on  or  before  the  last  due  date  as 
hereinafter  defined.  Failure  in  this  respect  subjects  it  not 
only  to  50  per  cent  additional  tax,  but  to  the  specific  penalty 
imposed  for  delinquency.  Each  corporation  should  carefully 
prepare  its  return  so  as  to  fully  and  clearly  set  forth  the  data 
therein  called  for.  Imperfect  or  incorrect  returns  will  not 
be  accepted  as  meeting  the  requirements  of  the  law. 


ART.  164.    To  any  sum  or  sums  due  and  unpaid  after  the      penalties    i 
date  for  payment  stated  in  the  notice  and  demand  issued  by   P°sed  by  act- 
the  collector  there  shall  be  added  the  sum  of  5  per  cent  of 
the  amount  so  unpaid,  and  interest  at  the  rate  of  1  per  cent 
per  month.     To  the  amount  assessable  on  the  basis  of  the 
net  income  there  shall  be  added  50  per  cent  in  case  of  refusal 
or  neglect  of  a  corporation  to  make  a  return  or  100  per  cent 

149 


in  case  of  a  false  or  fraudulent  return.  For  refusal  or 
neglect  to  make  a  return  within  the  prescribed  time,  or  for  a 
false  or  fraudulent  return,  the  corporation  so  offending  shall 
be  liable  to  a  specific  penalty  not  exceeding  $10,000.  Any 
person  divulging  unlawfully  any  information  whatever"  dis- 
closed by  a  return  shall  be  punished  by  a  fine  not  exceeding 
$1,000,  or  by  imprisonment  not  exceeding  one  year,  or  both. 


Any  person  or  any  officer  of  any  corporation  required  by 
law  to  make,  render,  sign,  or  verify  any  return,  who  makes 
Fraudulent  re-  any  f alse  or  fraudulent  return  or  statement  with  intent  to- 
defeat  or  evade  the  assessment  required  by  section  2,  act  of 
October  3,  1913,  shall  be  guilty  of  a  misdemeanor  and  shall 
be  fined  not  exceeding  $2,000  or  be  imprisoned  not  exceeding 
one  year,  or  both,  at  the  discretion  of  the  court,  wth  the  costs 
of  prosecution. 


Fiscal  year;       ART.  165.     The  Federal  income-tax  law  authorizes  cor- 
how  established,  porations,  joint-stock  companies,  etc.,  under  certain  condi- 
tions to  make  their  returns  on  the  basis  of  an  established 
"fiscal  year"  or  consecutive  12-months  period,  which  may  be 
other  than  the  calendar  year. 


Pursuant  to  this  provision  the  following  instructions  are 
issued  for  the  guidance  of  collectors  and  other  interested 
parties : 


M'av  designate  Any  corporation,  joint-stock  company,  or  association,  or 
ofyfiscafyei?slSI  anY  insurance  company  subject  to  the  tax  imposed  by  this 
must  give  at  act  may,  at  its  option,  have  the  tax  payable  by  it  computed 

least     30     days'  .        /V.  .   •  •    •      J  •         £  it 

notice  to  coiiec-  upon  the  basis  of  the  net  income  arising  or  accruing  from  all 
sor  desfignatedday  sources  during  its  fiscal  year,  provided  that  it  shall  designate 
the  last  day  of  the  month  selected  at  the  month  in  which  its 
fiscal  year  shall  close  at  the  day  of  the  closing  of  its  fiscal 
year,  and  shall,  not  less  than  30  days  prior  to  the  date  upon 
which  its  annual  return  is  to  be  filed  give  notice,  in  writ- 
ing, to  the  collector  of  internal  revenue  of  the  district  in 
which  its  principal  place  of  business  is  located,  of  the  day 
it  has  thus  designated  as  the  closing  of  such  fiscal  year. 


niustratiom  of       ART.  166.     In  pursuance  of  this  provision,  a  corporation 
year.  or  jj^e  organization  subject  to  this  tax  may,  for  example, 

designate  the  30th  day  of  September  as  the  day  for  the  clos- 
ing of  its  fiscal  year,  whereupon  its  return  of  annual  net  in- 
come shall  be  filed  with  the  collector  of  internal  revenue  of 
the  district  in  which  its  principal  place  of  business  is  located 
not  later  than  60  days  after  the  close  of  its  said  proposed 

ISO 


fiscal  year;  that  is  to  say,  on  or  before  the  29th  day  of 
November  next  succeeding. 

The  date  of  the  closing  of  the  fiscal  year  having  been  des- 
ignated, notice  thereof  must  be  given  to  the  collector  not 
less  than  30  days  prior  to  the  last  day  of  such  60-day  period. 
In  the  case  just  instanced  the  notice  must  be  given  not 
later  than  October  29. 

If  such  designation  (September  30,  1913)  had  been  made 
and  notice  given,  as  hereinbefore  indicated,  as  to  the  closing 
of  the  fiscal  year  1913,  the  corporation  would  be  authorized 
to  make  its  return  and  have  the  tax  payable  by  it  computed 
upon  the  basis  of  the  net  income  arising  or  accruing  to  it 
during  the  period  from  January  1  to  September  30,  1913, 
both  dates  inclusive. 


ART.  167.    Collectors  of  internal  revenue  receiving  notices      Collectors 
of  the  selection  and  designation  of  the  "fiscal  years,"  as   ???«?/  of  *the 
above  indicated,  will  make  record  of  the  same,  recording,   £fe  •'£  n  a 
(a)  the  name  of  the  corporation  or  like  organization,  (b)    year." 
the  date  when  notice  was  given,  (c)  the  day  designated  for 
the  closing  of  the  fiscal  year,  and  (d)  the  date  when  the  re- 
turn under  such  designation  must  be  filed,  which  must  be, 
as  above  stated,  not  later  than  the  last  day  of  the  60-day 
period  next  following  the  day  designated  as  the  close  of  the 
fiscal  year. 


ART.  168.     If  it  shall  appear  that  for  the  year  1913  the      Uuiess   notice 

.  .  .       ,.r'  .,       ,      .  •?  .      ,    .  ...        was  given  within 

notice  was  given  within  the  prescribed  time  —  that  is,  within   prescribed  time, 
30  days  of  the  last  day  of  the  60-day  period—  the  1913  re-  $$  n^erny  e  a  r 
turn  may  be  made  as  of  the  fiscal  year  so  established  ;  other- 
wise it  will  be  made  on  the  basis  of  the  calendar  year  until 
such  time  as  the  designation  shall  be  duly  made  and  notice 
thereof  properly  given. 


ART.  169.     The  designation  and  notice  can  not  be  retro-       Designation 

....  .y  .  ,      .  A        -1     anc*    notice    can 

active ;.  that  is  to  say,  if  a  corporation  now  designates  April  not  be  retroac- 
30,  1914,  as  the  date  of  the  closing  of  its  fiscal  year  and  gives  tive' 
notice  of  such  designation,  it  would  not  be  authorized  .to 
make  a  return  for  the  four  months  ended  April  30,  1913,  and 
then  for  the  fiscal  year  ended  April  30,  1914,  nor  would  it 
be  authorized  to  make  one  return  covering  the  entire  16 
months  ended  April. 30,  1914.  In  the  case  of  such  corpora- 
tion the  return  for  the  year  must  be  made  for  the  calendar 
year  ended  December  31,  1913,  and  then,  assuming  that 
designation  and  notice  had  been  properly  made  and  given, 
it  may  make  a  return  for  the  four  months  ended  April  30, 
1914,  and  thereafter  the  return  will  be  made  on  the  basis  of 
the  fiscal  year  so  established. 

151 


Where     fiscal       ART.  170.     In  all  cases  where  a  fiscal  year  is  not  estab- 

year  is  not  prop-      .  -11  11  t       t      "  • 

eriy  established,  lushed  as  above  prescribed  returns  must  be  made  on  the  basis 
madensfo™Ucaien-  of  the  calendar  year,  in  which  case  such  returns  must  be 
dar  year.  nied  on  or  before  the  1st  day  of  March  next  succeeding 

such  calendar  year.  Such  returns  in  either  case  provided 
must  be  verified  under  oath  or  affirmation  of  its  president  or 
other  principal  officer,  and  its  treasurer  or  assistant  treas- 
urer; that  is  to  say,  by  two  different  persons  acting  in  the 
official  capacity  indicated. 

Returns  made       ART.  171.    If  it  shall  appear  in  any  case  that  returns  have 

yearaS?t°8o  de-  been  made  to  the  collector  on  the  basis  of  a  fiscal  year  not 

be^acce  ted  nOt   designated  as  above  indicated,  the  corporations  making" such 

returns  will  be  advised  that  such  returns  can  not  be  accepted, 

but  must  be  made  to  cover  the  business  of  the  calendar  year. 

Returns  for  ART.  172.  Returns  made  under  this  act  and  pursuant  to 
made  "if*  new  these  instructions  must  be  made  on  the  new  forms  pre- 
forms-  scribed  by  this  department. 

The  forms  heretofore  in  use,  under  the  special  excise  tax 
law,  can  not  be  used  for  making  returns  for  either  the  fiscal 
or  calendar  year  1913. 

Extension  not  ART.  173.  An  extension  of  time  within  which  a  return 
<iays.ex(  may  be  filed  can  in  no  case  exceed  30  days  from  the  date  on 

which  the  return  is  due  and  can  be  granted  only  upon  writ- 
ten application  to  the  collector,  and  in  case  of  sickness  or 
absence  of  an  officer  whose  signature  to  the  return  is  re- 
quired, such  application  to  be  made  prior  to  the  expiration  of 
the  period  for  which  the  extension  is  desired. 

Returns  prop-  ART.  174.  If  a  return  is  made  and  placed  in  the  United 
eriy  maUed^m  staf-es  mails,  properly  addressed,  and  postage  paid,  in  ample 


e 


sub'eeCct0rto  "en*  ^me'  *n  ^ue  course  °f  mails,  to  reach  the  office  of  the  col- 
aity^und^r  ^Sr-  lector  or  deputy  collector  on  or  before  the  last  due  date,  no 
ons-     penalty   will  be  held  to   attach   should   the   return   not  be 
actually  received  by  such  officer  until  subsequent  to  that  date. 


Last  due  date  ART.  175.  "Last  due  date,"  as  hereinbefore  used,  is  con- 
strued to  mean  the  last  day  upon  which  a  return  is- required 
to  be  filed  in  accordance  with  the  provisions  of  the  law,  or 
the  last  day  of  .the  period  not  exceeding  30  clays  covered  by 
an  extension  of  time  granted  by  the  collector. 

faiS^oS  dsSnddaay       ART<  176>     When  tne  due  date  as  above  defined  falls  on 
or  legal  holiday.   Sunday  or  on  a  legal  holiday,  the  last  due  date  will  be  held 

152 


to  be  the  day  next  following  such  Sunday  or  legal  holiday 
and  the  return  should  be  made  to  the  collector  not  later 
than  such  following  day,  or,  if  placed  in  the  mails,  it  should 
be  posted  in  ample  time  to  reach  the  collector's  office,  under 
ordinary  handling  of  the  mails,  on  or  before  the  date  on 
which  the  return  is  thus  made  due  in  the  office  of  the  col- 
lector. 


ART.  177.    All  assessments  against  corporations,  etc.,  mak-       Assessment 
ing  returns  for  the  calendar  year  are  required  to  be  made    ?axespayment  °f 
and  the   several   corporations,   joint-stock   companies,   etc., 
notified  of  the  amount  for  which  they  are  liable  on  or  be- 
fore the  1st  of  June  of  each  successive  year,  and  said  assess-       For   caiendar 
ments  shall  be  paid  on  or  before  the  30th  day  of  June  of   year- 
such  year.     In  the  case  of  corporations  making  returns  for      Notice  of  as- 
the  fiscal  year,  the  assessments  shall  be  made  and  notice   sessment. 
given  on  or  before  the  expiration  of  90  days  from  the  date 
when  the  returns  were  required  to  be  filed,  and  the  taxes 
assessed  against  such  corporations,  etc.,  shall  be  paid  within 
120  days  after  the  date  upon  which  the  returns  were  re- 
quired to  be  filed.     In  case  of  refusal  or  neglect  by  a  cor- 
poration,  etc.,  to  make  a  return,  and  in  case  of   false  or 
fraudulent   return,   the   commissioner,   upon   the   discovery 
thereof  within  three  years  after  such  returns  are  due,  shall 
make  a  return  upon  information  obtained  in  the  manner  pro- 
vided in  the  act,  and  the  assessment  made  on  the  basis  of 
such  return  shall  be  paid  immediately  upon  notice  and  de- 
mand given  by  the  collector. 


Upon  failure  to  pay  the  tax  when  due  and  for  10  days      Failure  to  pay 
after  notice  and  demand,  a  penalty  of  5  per  cent  of  the    tax  when  due- 
amount  of  the  tax  unpaid  and  interest  at  the  rate  of  1  per 
cent  per  month  until  .paid  shall  be  added  to  the  amount  of 
such  tax. 


ART.  178.     When  the  assessments  shall  have  been  made,      Returns    are 


the  returns  shall  be  filed  in  the  office  of  the  commissioner  and  rteocor^: 


shall  constitute  public  records,  subject  to  inspection  upon  spectkm 
the  order  of  the  President,  under  rules  and  regulations  pre-  President. 
scribed  by  the  Secretary  of  the  Treasury  and  approved  by 
the  President.  Copies  of  returns  on  file  in  the  Commis- 
sioner's office  are  not  permitted  to  be  sent  to  any  person, 
except  to  the  corporation  itself  or  to  its  duly  authorized 
attorney. 


ART.  179.    Upon  request  of  the  governor  of  a  State  which  information  to 

imposes  a  general  income  tax,  the  proper  officers  of  such  States  yhich  *m- 

-_    A                                                                 *                              /-» «     1    1                              •  pose     i  n  c  o  m  c 

State  may  have  access  to  the  returns  filed  by  corporations  taxes. 

153 


doing  business  in  such  States,  or  to  an  abstract  thereof 
showing  the  name  and  income  of  such  corporations,  etc.,  at 
such  times  and  in  such  manner  as  the  Secretary  may  pre- 
scribe. In  no  case  are  the  original  returns  to  be  removed 
from  the  office  of  the  commissioner,  except  upon  order  and 
by  directon  of  the  Secretary  of  the  Treasury  or  the  Presi- 
dent. 

Certified  copies  ART.  180.  At  the  request  of  the  Attorney  General,  or  by 
direction  of  the  Secretary  of  the  Treasury,  certified  copies 
of  returns  may  be  made  and  delivered  to  the  United  States 
district  attorneys  for  their  use  as  evidence  in  the  prosecu- 
tion or  defense  of  suits  in  which  the  collection  or  legality 
of  the  tax  assessed  on  the  basis  of  such  returns  is  involved, 
or  in  any  suit  to  which  the  United  States  Government  and 
the  corporation,  etc.,  making  the  return  are  parties  and  in 
which  suit  such  certified  copies  would  constitute  material 
evidence. 

Penalty     for       ART.   181.     The  disclosure  by  any  collector,  deputy  col- 

giving     informa-  •  1  rv-  i  r       1 

tion    in    regard  lector,   agent,   clerk,  or  other  officer  or  employee  of   the 
to  returns.  United  States  to  any  person  of  any  information  whatever 

contained  in  or  set  forth  by  any  return  of  annual  net  in- 
come made  pursuant  to  this  act  is,  by  the  act,  made  a  mis- 
demeanor, and  is  punishable  by  a  fine  not  exceeding  $1,000, 
or  by  imprisonment  not  exceeding  one  year,  or  both,  at  the 
discretion  of  the  court,  and  if  the  offender  is  an  officer  or 
employee  of  the  United  States  he  shall  be  dismissed  and  be 
incapable  thereafter  of  holding  any  office  under  the  United 
States  Government. 

Bookkeeping.  ART.  182.  No  particular  system  of  bookkeeping  or  ac- 
counting will  be  required  by  the  .department.  However,  the 
business  transacted  by  corporations  must  be  so  recorded 
that  each  and  every  item  set  forth  in  the  return  of  annual 
net  income  may  be  readily  verified  by  an  examination  of  the 
books  of  account. 

Books  of  ac-  ART.  183.  The  books  of  .a  corporation  are  assumed  to 
e. gmc  e  reflect  the  facts  as  to  its  earnings,  income,  etc.  Hence  they 
will  be  taken  as  the  best  guide  in  determining  the  net  income 
upon  which  trie  tax  imposed  by  this  act  is  calculated.  Ex- 
cept as  the  same  may  be  modified  by  the  provisions  of  the 
law,  wherein  certain  deductions  are  limited,  the  net  income 
disclosed  by  the  books  and  verified  by  the  annual  balance 
sheet,  or  the  annual  report  to  stockholders,  should  be  the 
same  as  that  returned  for  taxation. 

Omitted  taxes       ART.  184.     In  cases  wherein  corporations  have  neglected 

may  be  assessed.  r          j    ,  j     •  i  • 

or  refused  to  make  returns,  and  in  cases  wherein  returns 
154 


made  are  found,  upon  investigation  or  otherwise,  to  be 
false  or  fraudulent,  the  commissioner  may,  upon  discovery 
thereof,  at  any  time  within  three  years  after  said  return  is 
due,  make  return  upon  the  information  obtained  in  the  man- 
ner provided  in  the  act,  and  the  tax  so  discovered  to  be  due, 
together  with  the  additional  tax  prescribed,  shall  be  assessed, 
and  the  amount  thereof  shall  be  paid  immediately  upon  no-, 
tice  and  demand. 


ART.  185.     Corporations  coming  within  the  terms  of  this      corporations 
law  are  subject  to  the  normal  tax  only;  that  is,  a  tax  com-   5JjJ/e£*Xito  n°r 
puted  at  a  level  rate  of  1  per  cent  of  their  entire  net  income 
regardless  of  the  amount  of  such  net  income. 


ART.  186.  For  the  purpose  of  verifying  any  return,  made 
pursuant  to  this  act,  the  Commissioner  of  Internal  Revenue 
may,  by  any  duly  authorized  revenue  agent  or  deputy  col- 
lector, cause  the  books  of  such  corporation  to  be  examined, 
and  if  such  examination  discloses  that  the  corporation  is 
liable  to  tax  in  addition  to  that  previously  assessed,  or  asses- 
sable, the  same  shall  be  assessed  and  shall  be  payable  im- 
mediately upon  notice  and  demand.  For  the  purpose  of 
such  examination,  the  books  of  corporations  shall  be  open 
to  the  examining  officer,  or  shall  be  produced  for  this  pur- 
pose upon  summons  issued  by  any  properly  authorized 
officer. 


Examination 
of  books. 


155 


Taxes  due  to       ART.  187.     All  income  taxes  found  to  be  due  will  be  re- 

be    reported    on 

assessment  lists,  ported  by  collectors  on  their  assessment  lists,  Form  23-A 
in  the  case  of  corporations,  and  on  Form  23-B  in  the  case  of 
individuals  and  withholding  agents. 


a?Pha-       ART-  188.    The  names  of  corporations  subject  to  tax  will 
beticai  order.       foQ  listed  on  Form  23-A,  according  to  their  designated  class, 
and  in  alphabetical  order  as  to  each  class.     Names  of  indi- 
viduals subject  to  tax  will  be  listed  on  Form  23-B,  alpha- 
betically, without  reference  to  class  or  rate  of  tax.    Follow- 
Names  of  with-  ing  such  names  there  will  be  listed,  alphabetically,  the  names 
how  to  be  listed!  of  all   withholding  or   licensed   collecting   agents,   and   the 
aggregate  amount  of  tax  withheld  by  each,  as  shown  by  the 
annual  returns  rendered  by  them.     An  assessment  against 
each  person,  firm  or  company,  from  whose  income  the  tax 
has  been  so  withheld,  will  be  unnecessary  in  such  cases. 


Assessment       ART.  189.    To  avoid,  as  far  as  possible,  the  assessment  of 

against  with- 

toldi>?  delfrr  *  taxes  as  to  which  claims  for  exemption  or  deduction  may 
until  annual  re-  be  filed  under  article  33,  collectors  will  delay  reporting  for 

ports    a  r  e    re*  .  . 

assessment  taxes  remaining  in  the  hands  of  withholding 
agents,  until  the  annual  reports  of  such  agents,  which  must 
be  filed  not  later  than  March  1  in  each  year,  are  received. 


<oRbeetu™a9<ieWhen  ART-  19°-  Returns  of  withholding  agents  (including  those 
of  licensed  collecting  agents)  as  to  interest  payments  shall 
be  made  monthly  and  returns  containing  summaries  of  said 
monthly  returns  shall  be  made  annually.  (See  Part  2,  A, 
B,  and  C.)  Returns  of  individuals  (see  Part  1),  corpora- 
tions (see  Part  3),  and  withholding  agents,  withholding  tax 
on  wages,  salaries,  rents,  etc.  (see  Part  2,  D),  and  fiduciaries 
acting  as  withholding  agents  (see  Part  2,  E)  shall  be  made 
annually.  All  monthly  returns  are  required  to  be  made  on 
or  before  the  20th  day  of  each  month  for  the  preceding 
inonth.  All  annual  returns  are  required  to  be  made  on  or 
before  the  1st  day  of  March  in  each  year,  except  in  the 

156 


case  of  corporations  which  have  given  due  notice  of  the 
termination  of  their  fiscal  year,  in  which  cases  the  pre- 
scribed return  is  to  be  filed  within  60  days  after  the  termina- 
tion of  such  fiscal  year. 

ART.  191.  Corporations  which  are  subject  to  the  special  Corporations 
excise  tax  on  income  received  during  the  months  of  January  "fj^ff^ear 
and  February,  1913,  may,  under  the  provisions  of  section  19 13  income  sub- 
4,  paragraph  S,  of  the  act  of  October  3,  1913,  include  such 
income,  as  also  the  income  taxable  under  said  act,  in  one  re- 
turn for  the  year  1913.  In  each  such  case  one  assessment 
only  will  be  made. 

ART.  192.    All  returns  of  income,  whether  of  individuals      Returns  of  in- 
or  corporations,  should  be  forwarded  with  the  assessment  ^led^Jitli  fas- 
list  rendered.     Where  in  any  case  the  collector  has  reason  sessment  lists. 
to  believe  that  any  return  rendered  is  false  or  fraudulent,      False  or  fraud- 
he  will  prepare  and  retain  in  his  office  a  copy  of  such  return,   ulent  returns- 
and  will  note  on  the  original  and  under  the  head  of  "Re- 
marks"   of   his    assessment   list   the   words    "Investigation 
pending."      He  will  in  all  such  cases  make  his  investigation 
in  the  manner  prescribed  in  section  3173,  Revised  Statutes, 
and  paragraph  D  of  said  act  of  October  3,  1913 ;  and  he  will 
report  the  results  of  his  investigation  to  the  Commissioner 
of  Internal  Revenue,  referring  to  the  list,  folo,  and  line  on 
which  the  assessment  was  reported. 

ART.   193.     Monthly  and  annual  returns  of  withholding      certain  returns 
agents   (including  those  of  licensed  agents)   as  to  interest  ^enTs^to^e^S 
payments   and   the   annual   returns   of   withholding   agents   dup?icSate° 
withholding  tax  on  wages,   salaries,  etc.,  will  be  made  in 
duplicate,  one  copy  of  which  will  be  retained  by  the  col- 
lector in  his  office  and  one  copy  transmitted  to  the  Commis- 
sioner of  Internal  Revenue.     Annual  returns  of  withhold- 
ing agents   (including  those  of  licensed  agents)   as  to  in- 
terest payments,  and  returns  of  withholding  agents  as  to 
wages,  salaries,  etc.,  and  of  fiduciaries  will  be  forwarded 
by  the  collector  with  his  list,  Form  23-B,  on  which  the  tax 
withheld  is  reported  for  assessment. 

ART.  194.  All  certificates  of  exemption  or  deductions,  filed      c e  r  t  ificates 
by  or  on  behalf  of  persons  subject  to  tax,  will  be  forwarded   S^onwded  as 
by  the  collector  as  soon  as  received ;  and  all  such  certifi-  soon  as  received. 
cates,  reports,  and  returns,  before  being  transmitted  to  the 
commissioner,   will   have   stamped   thereon   the   name   and 
number  of  the  district;  will  be  arranged  (unfolded)  in  alpha- 
betical order  and,  in  the  case  of  corporations,  according  to 
the  designated  class  to  which  they  belong.    Care  should  be 
taken  to  have  all  such  papers,  when  so  arranged,  carefully 

157 


secured  by  cord  or  other  fastening,  so  as  to  insure  their  re- 
ceipt in  like  order.  This  is  especially  necessary  in  view  of  the 
large  number  of  like  papers  which  will  be  forwarded  from 
the  various  districts. 


Reports  and 
returns  to  be  at 
once  examined 
by  collectors. 


Assessment' 
lists  to  be  pre- 
pared and  for- 
warded without 
delay. 


ART.  195.  In  order  that  assessment  lists  may  be  promptly 
prepared  and  forwarded,  collectors  will  see  that  all  reports 
and  returns  to  be  listed  are  examined  as  received,  and  that 
no  delay  occurs  in  this  branch  of  the  work.  Special  dili- 
gence in  this  matter  is  necessary,  as  sufficient  time  must  be 
given  for  the  reexamination  of  such  returns  in  the  com- 
missioner's office  before  assessment  is  made.  The  forward- 
ing of  assessment  lists,  however,  should  in  no  case  be  de- 
layed, beyond  the  time  allowed,  on  account  of  unexamined 
returns,  as  such  returns  can  be  examined  and  reported  on 
a  subsequent  list.  As  the  law  limits  the  time  in  which  these 
assessments  are  to  be  made  and  notice  of  assessment  given, 
collectors  will  assign  to  this  work  all  available  force  in  their 
respective  offices. 


to  be       ART.  196.    Where  the  required  returns  are  not  filed  with- 

sent    to    dehn-  ,.  .,       ,     .  -,1  •      i-    -j 

quents.  in  the  prescribed  time,  either  by  individuals  or  corporations, 

notice  on  Form  1045,  should  in  each  case  be  sent  to  the 
delinquent.  (For  authorized  extension  of  time,  see  articles 
23  and  173.) 


°f  **'  ART>  ^ -  When  assessment  has  been  made,  collectors 
will,  on  receipt  of  their  returned  lists,  at  once  issue  pre- 
liminary notices  of  assessment  (Form  647),  and  where  in 
any  case  the  tax  assessed  is  not  paid  on  or  before  the  30th 
day  of  June,  or  in  case  of  corporations  designating  their 
own  fiscal  year,  within  120  days  following  the  date  on 
which  the  return  should  have  been  filed,  notice  and  demand 
Demand  for  (Form  17)  should  be  at  once  issued,  and* unless  the  tax  in 
5  int'er'est.13''  such  case  is  paid  within  10  days  after  the  service  of  such 
notice,  general  demand  for  tax,  penalty,  and  interest  (Form 
21)  should  at  once  be  issued.  Immediate  notice  and  demand 
(Form  17)  will,  however,  be  served  in  case  of  failure  to 
file  the  required  return  within  the  statutory  period. 


on  return  of  list. 


?o   be"       ART-  19.8'     Pending  assessment  on  returns  forwarded  to 
sent  immediately  the  commissioner,  collectors  will  have  prepared  the  neces- 

r\**     «-A+«««-«*     f\(    I,'*-*-  . 

sary  notices  of  assessment,  with  properly  addressed  en- 
velopes, to  be  used  immediately  on  return  of  their  assess- 
ment lists. 

158 


ART.  199.     Statements  of  payment,  abatement,  and  out- 

1-11  -  11  -11    1  11     abatements,    and 

standing  balances  of  such  assessed  taxes  will  be  rendered  outstanding  bai- 
monthly  by  collectors   on  special  Form  325.     Such  state-   z 
ments  will  be  prepared  in  the  same  manner  as  required  in 
the  case  of  assessments  on. the  regular  Form  23,  except  that 
in  Statement  III  the  outstanding  balances  on  the  various 
lists  will  be  reported  in  aggregate  only.     Items  constituting      outstand- 
such  balances,  however,  will  be  carded  by  collectors,  but   'bneg   carded"  b? 
only  as  to   such  as   were  assessed   during  the  month   for   collectors, 
which  the  return  is  rendered,  thus  avoiding  detailed  state- 
ments each  month  of  outstanding  balances  previously  re- 
ported.   A  separate  card  (Form  1020)  will  be  used  for  each 
such  item;  and  all  cards  so  prepared  each  month  should  be 
arranged  alphabetically,  and  so  forwarded  by  the  collector 
with  his  report  on  special  Form  325. 

'  W.  H.  OSBORN, 

Commissioner  of  Internal  Revenue. 
Approved : 

W.  G.  McADOO, 

Secretary  of  the  Treasury. 


159 


INDEX 


NOTE. — Regulations  are  indexed  by  article  number.    Statute  is  indexed  by 
marginal  reference. 

ABATEMENT:  Article. 

Claim  for,  of  tax,  may  be  filed  when,  by  whom 33c 

ABSENCE: 

From  United  States,  who  may  make  claim  for  deductions  (Form  1008) 

for 33b 

Nonresident  alien  subject  to,  computed  same  as  for  citizens  of  United 
ADDITIONAL  TAX: 

States 8 

Regulations  for 2 

ADDITIONS  AND  BETTERMENTS: 

Constituting  increase  in  capital  investment  not  deductible  expense  of 

corporation 118 

ADJUSTMENT: 

Assessment  of  tax  withheld,  withholding  agent  to  be  notified 33c 

ADMINISTRATOR: 

Is  fiduciary  when 70 

Make  return  of  income  deceased  person,  when  and  what 17 

AFFIDAVIT: 

Verifying  return  of  income,  before  whom  made 22 

AGENT: 

Authorized,  may  sign  for  principal,  certificate  of  ownership  of  bond. ...     43 
Compensated  on  commission  basis,  income  of,  not  subject  to  withhold- 
ing at  source 32 

Return  made  by,  when 17 

Signing  for  principal,  certificate  of  ownership  of  bonds,  to  furnish 

evidence  of  authority  to  act,  when 43 

AGRICULTURAL  ORGANIZATIONS  :m 

Exempt  from  tax 51 

ALIENS* 

Nonresident — 

Duly  authorized  agent  of,  to  make  return  for  and  pay  tax,  when.  .       8 

Income  of,  what  to  be  included  in  return  of 8 

Net  income  of,  defined.' 8 

Normal  tax  on  entire  net  income  of 8 

Not  allowed  exemption  under  paragraph  C 8 

Not  entitled  to  exemption  under  paragraph  C 3 

Subject  to  additional  tax • 8 

Taxable  on  entire  net  income  in  United  States 1 

Tax  on  coupons  or  registered  interest  payable  in  United  States  to 

be  withheld  unless  certificate  of  exemption  (Form  1004)  filed .  .     46 
Resident — 

Certificate  of  ownership  of  bond,  when  and  how  to  be  used,  and 

to  specify  what 42 

Income  of,  from  coupon  or  registered  interest,  tax  on  to  be  de- 
ducted and  withheld  exempt  to  extent  exemption  claimed ....     44 
Taxable  on  net  income  less  exemption  and  deductions 1 

161 


INDEX. 
AMENDMENTS:  Article. 

Sections  3167,  3172,  3173,  3176,  Rev.  Stat. pp  58-59 

AMORTIZATION: 

Depreciation  for,  corporation  allowed,  when,  how 135 

ANNUAL  RETURN: 

Form  1013,  to  show  what,  and  to  be  filed  on  or  before  Mar.  1  each  year     50 
Of  coupons  or  interest  orders  not  accompanied  by  certificate  of  owner- 
ship (form  of),  what  to  show  when  filed,  totals  only  of  monthly  re- 
turn      53 

Of  licensee  for  collection  of  foreign  items  (form  of)  what  to  show,  with 

whom  filed,  when 59 

ANNUITY: 

Money  paid  for  (returned)  not  to  be  included  in  gross  income 5 

Taxable,  how  treated 63 

ANSWER: 

Of  guardian,  etc.,  to  notice  for  failure  to  make  return,  may  show  what     18 
APPEAL  : 

Decision  of  collector — 

All  papers  of,  to  Commissioner  of  Internal  Revenue;  dissatisfied 

may  submit  case;  furnish  sworn  testimony  to  prove  facts 48 

APPLICATION: 

For  license — 

For  collection  foreign  items 55 

To  collect  foreign  items  to  be  made  through  principal  office  to  col- 
lector of  district  in  which  located  principal  office 57 

APPLIED  SURRENDER  VALUES  AND  CONSIDERATION: 
For  supplementary  contracts — 

To  be  both  added  and  deducted  in  return  life  insurance  company  102 
ARRANGEMENT  AND  PACKING: 

Certificates,  reports,  returns,  for  forwarding  by  collector 194 

ASSESSMENT: 

Insurance  company,  reserve  of  , definition 147d 

Of  tax  to  be  made  by  Commissioner  of  Internal  Revenue 25 

Against  income  withheld  at  source,  where  to  be  made 38 

Against  withholding  agent 36 

Form  and  notice  of 197 

List  rendered,  collector  to  forward 192 

Amount  of,  when  persons  shall  be  notified pp  48-9 

Basis  of  calendar  year  or  fiscal  year,  time  to  be  made '.  .    177 

Failure  to  pay,  extra  tax  on p  48 

Limitation  on  time  of  making p  48 

Made  by  Commissioner  of  Internal  Revenue p  47 

Of  tax  against  withholding  agent,  deferred  until  agent  makes  return.  .    189 

Penalty  and  interest  for  non-payment  of,  exceptions P  48 

Persons  notified  of  amount  of .% ' p  48 

When  to  be  paid p  48 

ASSETS,  CAPITAL: 
Corporation — 

Change  in  book  value  by  annual  Adjustment  on  books,  that  value 

to  be  used  in  making  annual  returns,  net  income Ill 

Change  in- book  value  by  reappraisal,  gain  or  loss,  how  computed  .   Ill 

Profit  or  loss  on  sale  of,  how  determined 110 

Loss  from  sale  of,  how  ascertained 128 

Sale  of  corporation,  net  income  from,  how  determined 109 

Sale  of  by  corporation,  income  from,  how  determined. .  .  / 108 

Shrinkage  in  book  value  of  corporation,  'how  treated 134 

162 


INDEX. 

ASSOCIATION  : 

Charitable,  exemption,  when p .  51 

Making  false  return,  penalty  for p .  51 

Mutual,, domestic  building,  etc p..  51 

Neglecting  to  make  return,  penalty  for . . .p . 51 

Net  income  of,  preceding  calendar  year,  normal  tax  on p .  51 

Operating  under  "Lodge  system, "  Defined 89 

Refusing  to  make  return,  penalty  for p .  51 

Religious,  exemption p. 51 

Return  of,  when  available p .  58 

Scientific,  exemption,  when p. 51 

Taxes  to  be  assessed  by  Commissioner  of  Internal  Revenue,  when, 

section  3176 p. 60 

To  make  list  or  return  of  taxes,  how,  when,  section  3173 pp .  59-60 

AUTHORS: 

Earnings  of,  indefinite  or  irregular,  not  subject  to  withholding  at  source. . .   32 

B. 

BAD  DEBTS: 

Corporation,  deductible,  when 125 

Collected,  are  income : 125 

BALANCES: 

Outstanding  tax,  how  treated 199 

BANKS: 

Allowing  interest  on  deposits,  not  to  withhold  tax  from 67 

Deductible  status  of  taxes  assessed  against  stockholder,  paid  by 154 

Interest  paid  on  deposits  allowable  deduction 149 

Taking  coupons  for  collection,  originated  or  payable  in  the  United  States, 
duty  of 39 

MUTUAL  SAVINGS: — 

Having  capital  stock  represented  by  shares,  exempt  from  tax p. 51 

BENEFICIARIES: 

Exemption  from  tax  may  be  claimed  by,  from  fiduciaries 74 

Interest  received  by,  from  insurance  companies  on  insurance  contract, 
part  of  gross  income 5 

BEQUEST:  . 

Of  property — 

Income  from  part  of  gross  income ; . . .  .       4 

Value  of,  not  income 4 

BOARDS  OF  TRADE: 

Exempt,  when p .  51 

BOND: 

May  be  required  of  licensee  for  collection  of  foreign  items 56 

BONDS,  ETC: 

Of  corporations,  etc. — 

Income  from,  subject  to  withholding  at  source,  regardless  of  amount    37 
Interest  of  foreign,  subject  to  deduction  and  withholding,  when p. 50 

BOND  AND  MORTGAGES: 

Interest  on,  subject  to  deduction,  when .p. 50 

BOOKKEEPING: 

Requisites  of,  for  verifying  return 182 

BOOKS: 

Of  corporation  subject  to  examination,  by  whom,  for  what,  result 186 


ids 


INDEX. 
BOOK  VALUE: 

Capital  assets —  Article 

Change  in,  by  reappraisal,  gain  or  loss,  how  computed Ill 

Shrinkage  in,  how  treated 134 

BUILDING: 

Removal  of,  corporation,  not  deductible  loss,  why 127 

BUILDING  AND  LOAN  ASSOCIATION: 

Domestic,  defined;  what  necessary  to  exempt  from  tax 87 

BUSINESS: 

Lawful,  carried  on  for  gain  or  profit ;  income  from  part  of  gross  income. . .       4 

C. 
CALENDAR  YEAR: 

To  govern  when  notice  of  corporation  fiscal  year  not  given  in  time 168 

CAPITAL  ASSETS: 

Book  value  of  corporation,  shrinkage  in,  how  treated 134 

Corporation — 

Change  in  value  of,  by  annual  adjustment  on  books,  that  value  used 

in  making  return  annual  net  income Ill 

Change  in  book  value  by  reappraisal ;  gain  or  loss,  how  computed.  . .    Ill 

Loss  from  sale  of,  how  ascertained 128 

Profit  or  loss  on  sale  of,  how  determined 110 

Net  income  from  sale  of,  how  determined 109 

Sale  of,  by  corporation,  income  from,  how  determined 108 

CAPITAL  INVESTMENT: 

Corporation,  increased  by  additions  and  betterments,  not  deductible 

expense 118 

CEMETERY  COMPANY: 

Taxable  status  depends  on  what 90 

CERTIFICATE: 

Accompanying  foreign  items,  disposition  of,  by  licensee 61 

Claiming  deductions  account  partnership  expense,  what  and  how 47 

Claiming  exemption  and  deductions  to  accompany  annual  return  of  with- 
holding agents 69 

Claiming  exemption — 

As  nonresident  alien  must  be  filed  or  tax  withheld  from  payment 

payment  coupon  or  registered  interest 46 

From  tax  on  registered  interest  to  be  filed  at  least  five  days  before 

due  date  of  interest 44 

Of  withholding,  by  foreign  organization,  Form  1018 46 

For  nonresident  alien,  may  be  executed  by  whom 46 

Exemption  or  deduction,  disposition  of 194 

Form  of,  for  foreign  partnership  composed  of  nonresident  aliens,  resident 

aliens,  and  citizens  of  United  States 49 

Of  deposit,  interest  on,  part  of  gross  income 4 

Of  ownership  accompanying  coupons  or  registered  orders,  duty  of  col 

lecting  agency 39 

Of  ownership — 

By  corporations  organized  in  United  States  claiming  exemption 

of,  by  form  of,  and  how  executed 45 

Disposition  of,  by  collecting  agent • 40 

Of  persons  not  subject  to  having  tax  withheld,  disposition  of,  by 

debtors  and  withholding  agent 51 

Not  accompanying  coupons  or  interest  orders,  tax  to  be  withheld  by 
first  collecting  agent,  disposition  of  certificate 62 


164 


INDEX. 
CERTIFICATE— Continued. 

Of  ownership — Continued. 

Of  bonds —  Arcicle 

By  citizen  or  resident  of  United  States,  when  and  how  to  be 

used  and  to  specify  what 42 

By  corporations  organized  in  United  States  and  certain  ex- 
empt, must  be  filed  to  prevent  withholding 45 

May  be  signed  by  authorized  agents 43 

Of  corporal ons,  etc.,  organized  or  do^ng  business  in  United 

States,  form  of,  for  foreign  partnership 48 

Signed  by  agent,  when  verified  by  first  withholding  agent,  etc., 

good  in  other  hands 43 

Who  to  make  and  for  what 39 

Size  and  paper  for p  97 

Substitute  by  collecting  agent,  how  to  be  treated  by  debtors  or  with- 
holding agent 51 

That  of  collecting  agent  substituted  when 40 

CERTIFICATES,  REPORTS,  RETURNS: 

Arrangement  and  packing  of,  for  forwarding  by  collector 194 

CHAMBERS  OF  COMMERCE: 

Exempt,  when p  51 

CHANGE  IN  BOOK  VALUE: 

Capital  assets,  corporation,  reappraisal,  gain  or  loss,  how  computed  ...   Ill 
CITIZEN: 

Income  of,  from  coupon  or  registered  interest,  cax  to  be  withheld  on 

except  to  extent  exemption  claimed 44 

Of  United  States,  certificate  of  ownership  of  bond,  when  and  how  to 

be  used  and  to  specify  what 42 

Taxable  on  net  income  less  exemption  and  deductions 1 

Civic  LEAGUES: 

Exempt,  .when p  51 

Organizations — 

Exempt,  when p  51 

CLAIM  : 

For  exemption — 

By  whom,  for  what,  who  to  file 41 

Paragraph  C,  in  connection  with  foreign  item,  allowed  to  person 

entitled  to ' 60 

Penalty  for  false p  48 

What  must  show  and  how  executed 42 

When,  and  when  to  be  filed p  48 

Insurance  company,  amount  actually  paid  under  policy  contract,  con- 
stitute deduccion 147c 

COLLECTING  AGENCY: 

First  receiving  coupons  or  interest  orders  not  accompanied  by  certifi- 
cates of  ownership  should  withhold  tax  and  attach  its  certificate, 

Form  1002,  that  tax  withheld 52 

Agent — 

In  foreign  countries  to  have  privilege  of  substituting  certificates  for 

original  ownership 40 

Record  to  be  kept  by,  what 40 

Should  require  person  presenting  coupon  or  interest  orders  to  es- 
tablish identity '. 52 


165 


INDEX. 
COLLECTION  : 

Of  tax  from  withholding  agent 36 

COLLECTOR: 

Advanced  preparation  notice  of  assessment  by,  particulars 198 

Arrangement  and  packing  certificates,  reports,  returns 194 

Authority  of,  in  any  district,  section  3173 p. 59 

Claim  for  deductions  may  be  filed  with,  when 33c 

Dispatch  of  business  in  offices  of 195 

Duty  of— 

As  to  returns  withholding  agents 193 

If  persons  refuse  or  neglect  to  render  return p!59 

In  absence  from  home  or  place  of  business p .  59 

In  case  of  refusal  or  neglect  of  liable  individual  to  make  return. ...     21 

In  case  of  undervaluation  or  understatemenc p  .59 

In  forwarding — 

Annual  individual  return  to  commissioner 21 

Return  and  assessment  list  and  investigation  of  return 192 

In  making  returns  for  persons  failing  to  do  so p. 59 

Upon  receiving  notice  of  fiscal  year  of  corporation 167 

Failure' to  find  person  at  home,  duty  of,  section  3173 p  .59 

Sickness  or  absence,  may  extend  time  for  making  returns,  section  317G.p.60 

Legality  of  returns  made  by,  section  3176 p. 60 

Make  return  for  individual,  when 57 

May  enter  any  collection  district  to  examine  witnesses,  when,  section 

3173 p. GO 

Method  of  handling  and  accounting  for  outstanding  tax  balances 199 

Must  require  returns  to  be  verified  by  oath  or  affirmation 22 

Not  satisfied  with  responsibility,  applicant  for  license  to  collect  foreign 

items,  may  require  bond 56 

Of  what  district,  Form  1008  to  be  filed 33b 

Order  of  arrangement,  names  in  list  made  by 188 

Shall  make  report  of  false  or  fraudulent  returns,  how,  section  3176 p. 60 

Shall  require  deputies  to  ascertain  persons  liable  to  tax,  section  3172.  .p. 59 

Tax  statement  rendered  monthly,  particulars  of 199 

Tax  withheld  to  be  paid  to 34 

To  adjust  in  assessment  in  case  of  withholding,  when 33c 

To  furnish  withholding  agent  with  statement  of  claim  for  deductions 

filed  with  collector 33c 

To  obtain  testimony,  may  summon  whom,  section  3173 p. 59 

To  report  tax  due,  how,  forms  for 187 

To  send  notice  of  what,  form  of  and  time  to  serve 197 

To  send  notice  to  delinquent  and  file  return 196 

To  which,  application  of  principal  office  made  for  license  for  branch 

office,  to  serve  collector  in  district  of  branch  with  what 57 

When  claim  for  deductions,  paragraph  B,  to  be  filed  with 33b 

COMMISSIONER  OF  INTERNAL  REVENUE. 

Annual  return  of  individual  to  be  forwarded  to,  how 24 

Assessments -made  by P-48 

Facsimile  of  signature  on  licenses  for  collecting  foreign  items  furnished 

collectors 55 

Shall  add  50  per  cent  or  100  per  cent  to  tax,  when p  -60 

Shall  assess  taxes,  when,  section  3176 p. 60 

To  impose  additional  tax,'  when p  .48 


166 


INDEX. 

COMMISSIONER  OF  INTERNAL  REVENUE — Continued  Article 

Bo  issue  licenses  for  collection  of  foreign  items  through  collectors 54 

To  make  assessment  of  taxes;  give  notice  of,  when;  duty  of  in  case  neglect 

•or  refusal  to  make  return  or  false  or  fraudulent  return 25 

COMMISSIONS: 

Paid  to  salesmen  in  stock  of  corporation,  deductible  expense,  when 117 

COMPANY: 

Foreign,  normal  tax  on  business  transacted  in  United  States p  51 

Joint-stock,  etc.,  withholding  normal  tax  on  behalf  of  others p  48 

Mutual  cemetery,  exempt  when p  51 

Taxes  to  be  assessed  by  commissioner,  when,  section  3176 p  60 

COMPENSATION: 

For  personal  service,  part  of  gross  income 4 

Officers  and  employees  of  State  or  political  subdivision  of,  not  to  be  in- 
cluded in  gross  income. 5 

Paid  to  employees  of  corporation  on  basis  of  stockholdings  not  deducti- 
ble, why 119 

Present  President  and  judges  of  court  exempt  from  tax,  what 5 

Public-school  teachers  of  State  or  political  subdivision  of,  not  part  of 

gross  income , 5 

CONSIDERATION  FOR  SUPPLEMENTARY  CONTRACTS  AND  APPLIED  SURRENDER 
VALUES: 

To  be  both  added  and  deducted  in  return  life  insurance  companies 102 

CONSTRUCTION  OF  LAW: 

As  to  withholding  at  source,  liberal 97 

CONTRACT: 

Affecting  liability  of  a  taxable  person  as  such,  to  be  invalid 27 

COPIES  OF  RETURNS: 

How  obtained,  for  what  purpose 178, 180 

CORPORATION: 

Additions  and  betterments  constituting  increase  in  capital  investment 

not  deductible '. 118 

All  organized  in  United  States  subject  to  tax  (certain  exceptions) 76 

Amount  allowed  for  depreciation  of  property p  55 

Amounts  paid  employees — 

As  compensation  on  basis  of  stockholdings  not  deductible,  why 119 

For  pension  or  on  account  of  injuries,  deductible  expense 120 

Assessment — 

Insurance  company,  reserve,  definition 147d 

To  be  paid  when p  57 

Bad  debts  deductible,  when 125 

Banks,  etc. — 

Interest  paid  on  deposits,  etc.,  allowable  deduction 149 

Paying  taxes  assessed  against  their  stockholders,  deductible  status  of  154 

Books  of,  subject  to  examination,  by  whom,  for  what,  result 186 

CEMETERY,  taxable  status  depends  on  what 90 

Certificates  of  ownership  by  claiming  exemption,  form  of  and  how  execu- 
ted      45 

Change  in  book  value  of  capital  acsets  by  annual  adjustment  on  books, 

that  value  to  be  carried  into  return Ill 

Change  in  book  value  of  capital  assets  by  reappraisal,  gain  or  loss,  how 

computed Ill 

CHARITABLE,  exempt,  when p  51 


167 


INDEX. 
CORPORATION — Continued.  Article. 

Classes,  enumeration  of 162 

Collector  to  furnish  blanks  for  return  of 163 

Collecting  foreign  income,  to  have  license p  50 

Commissions  to  salesmen  paid  in  stock,  deductible  expense  when 117 

Complete  return  to  be  made  by  or  will  not  be  accepted 163 

Contract  with  by  State,  etc.,  prior  to  passage  income-tax  act,  income 

from  accruing  to  individual,  subject  to  tax 93 

Contract  with  by  State,  etc.,  prior  to  passage  income-tax  act,  income 

from  accruing  to  State,  etc.,,  exempt  from  tax  when 93 

Cost  of  buildings  on  leased  ground,  deductible  as  rent,  when 115 

DAIRIES,  cooperative,  not  subject  to  tax,  what 92 

Deductible  loss  defined 124 

Deduction  account  interest  on  indebtedness  limited  to  what;  when 81 

Deduction — 

Account  materials  and  supplies  on  hand,  what 123 

For  depletion  of  mines  regulation  and  rate  of,  limit  of 142 

For  depreciation  of  natural  deposits,  basis  and  limit  of 141 

For  depreciation  on  timberlands,  limit  of,  excess  of,  is  income 137 

For  depreciation  on  patent,  what,  how  determined 140 

For  interest  paid  at  different  rates,  rule  of  application 151 

For  obsolescence  of  patents,  what,  how  determined 138 

Defined 78 

Depreciation  timberland  from  removal  of  timber,  amount,  how  deter- 
mined    139 

Depreciation — 

Deductible,  amount,  how  treated 130 

Defined 129 

For  amortization  allowed,  when,  how 135 

How  determined 129 

Reserve,  use  of,  disposition  excess  of 132 

Division  of  depreciation  of  reserve,  correction 133 

Donation  for  charitable  purposes,  deductible  when 121 

Duties  not  deductible  as  tax  but  item  of  cost 155 

Educational,  exempt,  when p  51 

Engaged  in  more  than  one  class  of  business,  gross  income  ascertained  in 

accordance  with  applicable  definitions  of  such  income 112 

Every,  not  specifically  exempt,  required  to  make  return  of  income     80 

Evidence  requisite  for  allowance  of  deductions 158 

Excise  and  income  tax  for  1913  in  one  return 191 

Excise  tax  on,  for  what  period,  how  computed 160 

Exempt  from  tax,  what  are 87 

Expense  of  operation  and  maintenance  to  be  shown  in  return p  55 

Includes  what 114 

Failure  to  receive  blanks  will  not  excuse  from  making  returns,  or  from 

penalties  for  such  failure 163 

Firms,  etc,,  withholding  normal  tax  on  behalf  of  others p  9 

Fiscal  year  of,  how  established,  what  to  do 165 

Illustration  of  and  what  to  do 166 

FOREIGN,  normal  tax  on  business  in  United  States p  51 

Coupons,  checks,  bills  of  exchange,  etc.,  normal  tax  deducted  from, 

when. . . .- -P  50 

Dividends  on  stocks  of,  normal  tax  deducted  when p  50 


168 


INDEX 
CORPORATION — Continued. 

FOREIGN — Continued.  Article. 

Having  more  than  one  branch  office  in  the  United  States  to  desin- 

nate  principal  office  and  person  to  make  return 83 

Interest  on  indebtedness  to  be  deducted,  what p  57 

To  give  amount  of  bonded  and  other  indebtedness p  56 

To  set  forth  paid-up  capital  stock p  57 

Form  of  return  prescribed  for 163 

General  expense  foreign  steamship  companies,  how  treated 116 

Gifts  or  gratuities  to  employees  not  deductible 120 

Good  will,  depreciation  not  allowed  in  connection  with 136 

Gross  income — 

Difinition  of 96 

General  definition 107 

Gross  value  at  the  mines,  definition  of 142 

In  addition  to  deduction  for  depletion  of  mines,  etc.,  deduction  for  de- 
preciation of  plant,  what,  basis  of 143 

Income — 

Excepted  during  the  year 15 

From  sale  of  capital  assets,  how  determined 108 

How  ascertained p  52 

Losses  from p  52 

INSURANCE  COMPANY — 

"Deductible  net  addition  to  reserve,"  definition;  what  basis  of  com- 
putation of;  whan  not  to  be  included  in 147d 

Deduction,  claims  actually  paid  under  policy  contract 147c 

Depreciation  loss  by  shrinkage  in  property  value,  what  and  when 

deductible 147b 

Gross  income  of,  definition  of 97, 101 

Losses,  deductions  for,  what 147a 

Reserve  to  meet  losses,  how  treated 147c 

Salvage,  how  to  be  treated  in  return  of 147c 

Interest  paid — 

As  rental,  how  treated • 148 

By,  on  mortgage  on  property  in  whach  corporation  has  equity  or  is 

purchasing 148 

Deduction,  what,  when 148 

On  debts  secured  by  collateral  subject  to  sale,  deductible,  when,  why  150 

On  deposits,  etc.,  deductible,  when 113 

Inventory,  purpose  and  use  of;  kinds  of 161 

Leased,  to  make  its  own  return 82 

Leasing  oil  or  gas  territory,  deductions  for  depletion,  basis  of 144 

Lessee,  property  of,  assuming  indebtedness  of  lessor,  return  by  lessee, 

what 81 

Lessee,  not  to  include  capital  stock  or  debts  of  lessor  in  return,  except .  .     82 

LIFE  INSURANCE  COMPANY — 

Applied   surrender  values   and    consideration  for  supplementary 

contracts  both  added  and  deducted  in  return 102 

Deductions  from  gross  income,  what 100 

Gross  income,  definition  of 101 

Supplementary  statement  attached  to  return  of,  showing  what .  .  .  103 

Liquidation  of,  make  final  return  of  whac;  filed  when  and  where 85 

"Lodge  system,"  defined 89 


169 


INDEX. 
CORPORATION — Continued. 

Loss —                                                                                                      Article. 
Actual,  sustained p  52 

Sustained  during  year p  55 

From  removal  of  buildings,  not  deductible,  why 127 

From  sale  of  capital  assets,  how  ascertained 128 

Securities  below  par,  how  treated 135 

Making  false  return,  penalty  for p  51 

May  designate  day  to  pay  tax p  57 

Manufacturing  company,  gross  income,  definition 104 

Mercantile  company,  gross  income,  definition 105 

Miscellaneous,  gross  income,  definition 106 

Mutual  companies  making  return,  definition^  net  income 80 

Mutual  fire  insurance  company — 

Gross  income,  definition 98 

Supplementary  statement  attached  to  return,  showing,  what 103 

Mutual  marine  insurance  company — • 

Deductions  from  gross  income,  whai 99 

Supplementary  statement  attached  to  return  of,  showing  what. ...    103 

Will  deduce,  what 147d 

Neglecting  to  make  return,  penalty  for p  51 

Net  income — 

Annual,  normal  tax  on p  51 

Engaged  in  more  than  one  class  business,  how  ascertained 113 

For  1913,  how  ascertained 159 

Preceding  calendar  year,  normal  tax  on / p  51 

Of,  should  be  what 158 

Of,  which  is  distributable  to  owners  thereof;  subject  to  tax 79 

From  all  sources p  52 

From  sale  of  capital  assets,  how  determined 109 

To  be  shown  on  return p  57 

No  specific  exemption  from  tax 160 

Notice — 

Given  of  assessments  made p  57 

Of  fiscal  year,  not  retroactive 169 

Not  receiving  blank  for  making  return,  should  make  application  for,  to 

whom,  when 163 

Not  to  include  taxes  paid  in  foreign  countries  in  income;  see  seventh 

deduction .  .p  57 

Officers  of,  making  false  return,  penalty p  51 

Only  on  return  and  assessment  for  1913 160 

On  what  taxed;  what,  and  amount  of p  51 

Operacing  mines,  oil  or  gas  wells,  on  royalty  basis,  not  allowed,  deduction 

for  depletion  of  deposits 145 

Operations  of,  etc.,  unlawful  to  divulge.     Section  3167 p  58 

Organized—- 
During the  year,  to  make  return  of  what 84 

Elsewhere  than  in  United  Stales,  subject  to  tax  on  what 77 

In  United  States  and  certain  exempt,  interest  on  bonds  payable  to, 

tax  not  to  be  withheld  if  certificate  of  ownership  filed 45 

Paid-up  capital  stock,  definition  of 95 

Partnership — 

Limited,  is,  and  subject  to  corporation  tax 86 

Ordinary,  not  subject  to  tax  as 94 


170 


INDEX. 

CORPORATION — Continued.  Article. 

Payments  on  account  of  tax  from  covenant  in  bonds,  not  deductible  in    ^ 

ascertaining  net  income. 113 

Penalty  for — 
Failure  to 

Make  return p.  20,  Art.  163 

Pay  tax  by  j  une  30 p .  57 

Refusal  to  make  return p .  51 

Profit  or  loss  on  sale,  capital  assets,  how  determined 110 

Public  utility,  governmental  function,  income  accruing  through,  to  State, 

exempt  from  tax 93 

Railroad  whose  income  paid  by  its  lessee  direct  to  stock  holders  must 

make  return  of  income 80 

Religious,  exempt p .  51 

Repairs  may  be  deducted,  what. 131 

Reserve  for — 

Insurance  of  own  property  not  deductible 122 

Losses,  not  deductible .' 126 

Taxes,  not  deductible 156 

Return — 

For  1913  must  be  on  new  form  and  not  on  excise  form  heretofore 

used ; 172 

To  be  made,  when 190 

When  available p .  58 

When  State  officers  may  have  access  to p .  58 

When  to  be  made.     Section  3173 p .  59 

Shrinkage  in  value,  capital  assets,  how  treated 134 

Special  excise  tax,  how  computed p .  63 

Status  for  taxation  purposes  to  be  established,  how 88 

Subject  to  tax — 

Classes  enumerated p .  51 

Normal  only,  but  not  entire  net  income 185 

Special  ecxise,  under  act  August  5,  1909 p. 63 

Taxable  status  in  doubt,  must  make  return  and  attach  thereto  statement 

showing  what 91 

Tax- 
Computed  on  nee  income  of 159 

Deduct  amount  paid  for . . . p . 57 

Paid  by- 
Constitute  deduction,  when 152 

When  not  deductible 153 

To  be  assessed  by  Commissioner  of  Internal  Revenue,  when.     Sec- 
tion 3176 p.  60 

To  give  notice,  day  designated  for  return p  .54 

Make  list  or  return,  how,  when.     Secion  3173 p. 59 

Unearned  increment,  not  value  for  depreciation  purposes 146 

United  States,  filing  certificates  of  ownership,  exempt  from  withholding 

of  foreign  items 60 

When  to  make  return : p. 54 

COST: 

Of  buildings  on  leased  ground,  deductible  as  rent  of  corporation,  when.   115 


171 


INDEX. 

D. 
DAIRIES:  Article. 

Cooperative,  not  subject  to  tax,  what 92 

DEBTOR: 

Annual — 

List  return  by,  when  and  what 50 

Return  by,  to  show  totals  only  of  monthly  list  return 51 

Definition  of 38 

How  to  treat  substitute  certificate  of  collecting  agent  and  certificate  of 

owner  not  subject  to  having  tax  withheld 51 

Interes.  on  bonds  due,  corporations  organized  in  United  States  and 

certain  exempt,  not  to  withhold  tax  if  certificate  filed ,45 

Maker  of  note  given  in  payment  of  interest  held  responsible  for  tax  on.     68 

May  appoint  withholding  and  paying  agent  to  act  for  it 38 

Note  given  in  payment  of  income,  maker  of  note  is 68 

Not  to  withhold  agams,  nonreside.  alien  or  foreign  organization  doing 

business  in  Unked  Scales,  when 46 

Not  to  withhold  when  receiving  certificate  of  collecting  agenc  that  tax 

withheld  by  same,  disposition  of  certificate 52 

Return  of  withholding  by,  where  to  be  filed 38 

In  United  States  (or  its  wkhholding^agent)  charged  with  duty  of  with- 
holding from  coupons  or  registered  interest 39 

In  United  States,  duty  of,  before  payment  of  registered  interest 41 

When  source  for  withholding  purposes 31 

"DEDUCTIBLE  NET  ADDITION  TO  RESERVE"; 

Insurance  company;  definition;  what  basis  of  computation  of;  what 

not  to  be  included  in 147d 

DEDUCTION: 

Account  partnership  expense,  account  of  and  form  for  claiming 47 

Additions  and  betterments  constituting  increase  in  capital  investment, 

not 118 

Allowance  for  in  computing,  what,  when p  45 

Amount  of,  to  ascertain  net  income p  45 

At  suorce,  applies  to  normal  tax  only p  51 

Bad  debts  of  corporation,  when 125 

Basis,  for  depletion  leased  oil  or  gas  territory 144 

Claims  for — 

Filed  with  collector,  withholding  agent  to  be  furnished  statement  of.  33  c 

May  be  filed  with  withholding  agenc,  when 33 c 

Not  allowed  unless  made,  when p  49 

Commission  to  salesmen  paid  in  stock  of  corporation  is,  when 117 

Compensation,  officers  and  employees  of  State,  etc.,   except,   when; 

judges  Federal  courts  now  in  office;  present  President  for  present  term,  p  46 
Compensation  paid  employees  of  corporation  based  on  stockholding, 

not,  why 119 

Corporation — 

Account  interest  paid  on  debt,  limited  to  what,  when. . 81 

Material  and  supplies  on  hand,  what 123 

Depreciation,  amount,  how  treated ' 130 

Donation  for  charitable  purposes,  when 121 

Evidence  requisite  for  allowance  of 158 

For  interest  paid  at  different  rates,  rule  of  application 151 

Gifts  or  gratuities  to  employees,  not 120 

Pensions  and  damages  for  injuries  to  employees,  are 120 


172 


INDEX. 
DEDUCTION — Continued. 

Corporation — Continued. 

Reserve —  Article. 

For  insurance  its  own  property,  not 122 

To  meet  losses  insurance  companies,  not 147c 

Status  of  tax  for,  to  bank,  assessed  against  stockholder,  paid  by  bank  154 

And  exemptions  in  certain  cases p  49 

Debts  due  taxpayer,  ascertained  worthless  and  charged  off  in  year p  45 

Depletion  of  mines,  regulation  of  rate  of,  limit  of 142 

Depreciation — 

Defined 129 

For  amortization,  allowed  when,  how 135 

How  determined 129 

Loss  by  shrinkage  in  property  value,  insurance  company,  what  and 

when 147d 

Reserve,  how,  disposition  excess  of. ".    132 

Of  good  will  not  allowable 136 

Of  natural  deposits,  basis  and  limit  of 141 

Of  plant  (in  addition  to  deduction  for  depletion  of  mine),  what,  and 

basis  of 143 

On  patent,  what,  how  determined 137 

Unearned  increment,  not  value  for  purpose  of 146 

Timberland — - 

Limit  of,  excess  of,  is  income 140 

Removal  of  timber,  amount,  how  determined 139 

Dividends  on  stock,  what,  when p  46 

Exemption  under  paragraph  C,  not  allowed  nonresident  alien. .  .p  46,  art.  8 

False  statement  in  regard  to,  penalty p  49 

From  gross  income — 

Mutual  marine  insurance  companies,  what 99 

Of  nonresident  alien,  what 8 

To  ascertain  net  income,  for  normal  tax,  paragraph  B,  what 6 

From  net  income  to  ascertain  taxable,  exemption,  paragraph  C 6 

From  premiums,  etc.,  by  whom  made,  when P  49 

For  ascertaining  net  income,  what 3 

For  fire,  storm,  shipwreck p  45 

Foreign  corporation,  to  ascertain  net  income 157 

For  expense  of  business,  partnership  may  claim,  >when  and  how 14 

For  restoring  property,  etc.,  none p  45 

Increase  value  of  property,  none p  45 

Insurance  company — 

Claims  actually  paid  under  policy  contract,  are 147c 

Losses,  what 147a 

Interest  on  obligations,  State  or  political  subdivision  of,  and  of  United 

States  or  possession ' p  46 

Interest  paid  by — 

Bank,  etc.,  on  deposits,  etc.,  is 149 

Corporation — 

As  rental,  not  allowable 148 

Is,  what,  when 148 

On  indebtedness  secured  by  collateral  subject  to  sale,  when,  why  150 
On  mortgage  on  property  in  which  corporation  has  equity,  is 
and  amount  of 148 


178 


INDEX. 
DEDUCTION — Continued.  Article. 

Joint-stock  company p .  45 

Life  insurance  company — 

From  gross  income,  applied  surrendered  values  and  consideration 

for  supplementary  contracts 102 

From  gross  income,  what ' 100 

Loss — 

During  year p .  5 

Which  corporation  may  make,  defined 124 

From  removal  of  building  not  deductible,  why 127 

From  sale — 

Capital  assets,  how  ascertained 128 

Corporation  securities  below  par,  how  treated 135 

May  be  claimed  account  tax  on  note  given  in  payment  of  income 68 

Only,  claim  for,  may  be  filed  wich  collector,  when 33c 

Mutual  marine  insurance  company,  what 147d 

Not  compensated  by  insurance  or  otherwise p. 45 

Notice  to  be  filed  for p .  10 

Obsolescence  of  patents,  whac,  how  decermined 138 

Paid  for  new  buildings,  none p .  45 

Paragraph  B — 

For  normal  tax  only,  7  and  8  included  for  purpose  of  additional  tax .     44 

May  be  claimed  in  case  of  fixed,  deterrriinable  annual  income 66 

Not  claimed  of  withholding  agent  in  time,  only  remedy,  applica- 
tion for  refund 33c 

When  claim  for  (Form  '.  at  or 

collector 33b 

Permanent  improvements  or  betterments,  none p. 45 

Property  owned,  business  carried  on  in  Unite;]  -rson  residing 

elsewhere,  what p. 45 

Repairs,  when 131 

Reserve  for  losses,  not 126 

Single  person,  amount  allowed p .  45 

Tax  withheld,  when p .  45 

Taxss  paid  by  corporation — 

Are,  when 152 

When  not 153 

To  ascertain  net  income  corporation  ei  :s  of 

business 113 

DEEHS  OF  TRUST,  ETC.: 

Corporation,  income  from,  subject  to  withholding  at  source  regardless  of 

amount,  when p .  10,  art .  37 

DELINQUENT: 

Tax  becomes,  if  not  paid  by  June  30 25 

DEPLETION: 

Deduction  for,  mines,  oil  or  gas  wells  operated  on  royalty  basis,  not 

allowed  operating  corporation 145 

Leased  oil  or  gas  territory,  basis  for  deduction  for 144 

Of  mines,  etc.,  regulation  of  rate  of  deduction  for,  limit  of 142 

DEPOSIT: 

Certificate  of,  in  ceres  t  on,  part  of  gross  income 4 

Interest  on,  not  subject  to  withholding;  must  be  included  in  personal 

return  whether  paid  or  not 67 

Interest  on,  part  of  gross  income 4 

174 


INDEX. 
DEPRECIATION  :  Article. 

Corporation,  defined 129 

Deductible,  amount  how  treated 130 

Deduction  for — 

Of  natural  deposits,  basis  and,  limit  of 141 

Of  plant  (in  addition  to  deduction  for  depletion  of  mine),  what,  and 

basis  of 143 

On  patent,  what,  how  determined : 137 

Diversion  reserve  for,  correction 133 

For  amortization,  allowed  when,  how 135 

Gross  value  at  the  mine,  defined 6 

How  established  in  case  of  mines 6 

Loss  by  shrinkage  in  property  value,  insurance  company,  what,  and 

when  deductible 147b 

Of  good  will  not  allowable  deduction 136 

Timber-land — 

From  removal  timber,  amount,  how  determined 139 

Deduction  for,  limit  of,  excess  of  is  income 140 

Unearned  increment,  not  value  for  basis  of  deduction  for 146 

DEPRECIATION  RESERVE: 

Use  of,  disposition  excess  of 132 

DEPUTY  COLLECTOR: 

Ascertain  persons  liable  to  tax  and  enumerate  objects,  section  3172. . .  .p  60 

Legality  of  returns  made  by,  section  3176 p  60 

To  make  report,  false  or  fraudulent  return,  how,  section  3176 p  60 

DESCENT: 

Of  property — 

Income  from,  part  of  gross  income 4 

Value  of,  not  income 4 

DEVISE  OF  PROPERTY: 

Income,  part  of  gross  income;  value  of,  not  income 4 

DISPATCH  OF  BUSINESS: 

In  collector's  office .' 195 

DISTRICT  OF  COLUMBIA: 

Exemptions,  proviso p  51 

DIVERSION: 

Depreciation  reserve,  correction 133 

DIVIDENDS: 

Compensation  paid  employees  of  corporation  based  on  stockholding 

are,  when 119 

Cooperative  dairies,  is  purchase  price  of  raw  material .  . ' 92 

Of  corporations  subject  to  tax  not  subject  to  withholding p  49,  art  32 

Deducted  from  net  income,  when 3 

Part  of  gross  income 4 

Stock  foreign  corporations,  subject  to  withholding  when p  50 

Stock  subject  to  tax — individual  owning,  how  treated p  48 

DOCTORS: 

Fees  of,  indefinite  or  irregular  not  subject  to  withholding 32 

DONATIONS: 

By  corporation  for  charitable  purpose,  deductible  when 121 

DOMESTIC  BUILDING  AND  LOAN  ASSOCIATION: 

Definition,  what  necessary  to  exempt  from  tax 87 

DUE  DATE: 

Return  on  Sunday  or  legal  holiday,  effect  of .176 

DUTIES: 

Not  tax  and  not  deductible  but  are  item  of  cost 155 

175 


INDEX. 

E. 
EDUCATIONAL  CORPORATIONS:  Article. 

Exempt  when p  51 

EMPLOYEES: 

State  or  political  subdivisions,  compensation  of  officers  and  employees 

paid  by,  not  part  of  gross  income 5 

vState  officers  or  employees,  compensation  paid  by  United  States  a  part 

of  gross  income 5 

ENDOWMENT: 

Money  paid  for;  returned  not  to  be  included  in  gross  income 5 

EVIDENCE: 

Furnished  by  agent  of  authority  to  sign  ownership  certificate  to  be  re- 
tained by  verifying  agent 43 

Guardian,  etc.,  served  with  notice  for  failure  to  make  return,  may  fur- 
nish, what 18 

Of  nonliability  to  payment  of  tax,  filed  with  withholding  agent,  may  be 

forwarded  to  collector  in  lieu  of  tax p  57 

Requisite  for  allowance  of  deduction  by  corporation 158 

EXCISE  AND  INCOME: 

Tax,  corporation,  1913  In  one  return 191 

EXCISE  TAX: 

Corporation .,  for  what  period,  how  computed 160 

EXECUTOR: 

Is  fiduciary  when 70 

Make  return  of  income  of  deceased  within  taxable  year,  when  and  what.     17 
EXEMPT: 

From  tax — 

Corporations,  what 87 

Co-operative  dairies,  what 92 

Income  from  public  utility 93 

EXEMPTION: 

Allowed  in  computing  taxable  income  of  deceased  person,  when 17 

Amount  allowed  married  person p  46 

Beneficiary  may  claim  from  fiduciary 74 

Boards  of  trade,  when p  51 

And  deductions i . .p  11 

Cemetery  Company,  depends  on  what 90 

Certificate  claiming  by  corporation  organized   in  United   States   form 

of  and  how  executed 45 

Certificate  claiming,  what  must  show  and  how  executed 42 

Chambers  of  commerce,  when p  51 

Charitable  associations,  when p  51 

Civic  leagues  or  organizations,  classes  of,  when p  51 

Claimed  by  fiduciary,  forms  1015  or  1019 70 

Claimed  for — 

By  whom,  with  whom  and  when  to  be  filed p.  49,  Art.  41 

How  to  be  filed p  49 

May  be  filed  with  withholding  agent  when 33c 

Under  paragraph  C — 

Allowed  to  person  permicted  to  claim 60 

Failure  to  claim,  effect  of 65 

Corporation  claiming — 

To  establish  rights  to,  how gg 

Whose  taxable  status  in  doubt,  must  make  return  and  attach  state- 
ment showing  what 91 

Districts  of  Columbia,  provisions p  51 

176 


INDEX. 
EXEMPTION — Continued.  Article. 

Domestic  building  and  loan  associations .p  51 

Educational  corporation,  when p  51 

False  claim  or  statement  as  to,  penalty  for 33a 

Fraternal  societies p  51 

Husband  and  wife — 

Living  together,  citizen  or  resident  alien,  add  incomes  for  purpose 

of,  amount  of 1 10 

Separated  and  living  permanently  apart,  citizen  or  resident  alien, 

each  entitled  to  $3,000 10 

Individual — 

Deduction  of  from  net  income  to  ascertain  taxable 3 

Amount  of  for  1913 7 

Single,  or  married  but  not  living  with  husband  or  wife,  may  claim 

$3,000  each 9, 10 

May  be  claimed,  note  given  in  payment  of  income 68 

Mutual  Cemetery  Companies p  51 

None  for  corporations 160 

Paragraph  C — 

Not  allowed  nonresident  alien 8 

Not  claimed  of  withholding  agent  in  time,  only  remedy  application 

for  refund 33c 

To  be  filed  with  withholding  agent  when 33 

Philippine  Islands p  51 

Porto  Rico p  51 

Public  utility p  51 

Religious  associations  and  corporations p  51 

Scientific  associations  when p  -51 

Status  of  person  claiming  determined  as  of  time  of  claim 10 

To  be  deducted  from  net  income  to  ascertain  taxable  under  paragraph  C       6 
EXPENSE: 

Deductible,  pension  or  amounts  paid  employees  account  injuries  are . . .   120 

General,  foreign  steamship  companies,  how  treated 116 

Of  operation  and  maintenance  corporate  business,  what  includes 114 

Partnership  may  claim  deduction  for,  when  and  how 14 

EXTENSION: 

Time  for  filing  return,  when,  what,  how 23 

To  make  return,  not  exceed  what,  how  and  to  whom  made 173 

FALSE  RETURNS: 

Additional  tax  imposed p  48 

Or  fraudulent,  penalty p  60 

FIDUCIARY: 

Annual  return  by,  what  to  show  and  how  executed 73 

Definition  of 70 

Filing  notice  with  other  withholding  agent  (Form  101§),  nothing  to  be 

withheld 70 

Having  withheld  and  paid  tax  on  undistributed  annual  net  income  not 

to  again  withhold  when  distribution  made 75 

Income  of  beneficiary  not  distributed  during  the  year;  what  to  be  shown 

in  return;  tax  to  be  withheld  and  paid  when 74 

May  be  appointed  agent  or  attorney  for  the  purpose  of  making  personal 

return  of  income  (Form  1040)  for  beneficiary 72 

Optional  claim  (Form  1015  or  1019) 70 

liigulations  as  to 70-75 


Iff 


INDEX. 
FIDUCIARY — Continued.  Article. 

Return  by  must  be  made  when 71 

Return  by  to  include  only  matter  within  scope  of  authority 72 

Return  of  not  to  include  income  on  which  tax  paid 71 

Return,  when  to  be  made 190 

To  make  annual  return  (Form  1041)  to  collector  of  District  when,  to  show 

what 71 

FIRM: 

To  make  return,  how,  when,  section  3173 p  59 

Collecting  foreign  items,  license  required p  11 

FISCAL  YEAR: 

Corporation — 

Duty  of  collector  upon  receiving  notice  of 167 

How  established,  what  to  be  done 165 

Illustration  of  and  what  to  do 166 

Making  return  on  basis  of  but  not  so  designating,  return  not  accepted 

and  must  be  made  for  calendar  year 171 

Notice  of  not  retroactive 169 

Notice  to  collector  not  given  in  prescribed  time,  calendar  year  to 

govern 168 

Not  properly  established,  return  to  be  made  for  what  calendar  year  and 

filed  when ' 170 

FOREIGN: 

Corporation — 

Doing  business  in  United  States — 

Provision  for p  55 

Return  by p  57 

Particulars  of p  56 

Where  filed p  55 

Subject  to  tax  on  what 77 

Tax  on  net  income;  net  income  defined;  deduction^  to  ascertain. .  .   157 
Items — 

Too  small  for  notation  on.  statement  of  facts  may  be  attached  to.    58 

License  required  for  collection  of,  when  and  from  whom 54 

Provisions  for  collection  of  tax  on  apply  wherever  said  items  pay- 
able, if  paid  in  United  States 61 

Income  paid  in  United  States,  provisions  for  collection  of  tax  on 54-62 

Organization  doing  business  in  United  States  subject  to  tax  but  exempt 

from  withholding  upon  filing  certificate  claiming  (Form  1018) 46 

Partnership  owning  bonds  of  corporations  organized  or  doing  business 

within  United  States,  not  subject  to  withholding  on  interest  of,  when .  .     48 
Payments  of  dividends,  etc.,  provisions  as  to  collection,  license,  penalty  .p  50 

Steamship  company,  general  expense  of,  how  treated 116 

FRAUDULENT  RETURN: 

Additional  tax  imposed;  time  limit  for  paying  after  notice p  48 

G. 
GAINS: 

For  taxable  purposes  arising  or  accruing  within  calendar  year,  part  of 
gross  income,  what 4 

GAS  OR  OIL  TERRITORY  LEASED: 

Corporation,  basis  of  deduction  for  depletion  of 144 

GAS  OR  OIL  WELLS  AND  MINES: 

Operated  on  royalty  basis,  deduction  for  depletion  of  deposits  not  allowed 
operating  corporation 145 


INDEX. 

GIFT:  Article. 

Of  property,  income  from  part  of  gross  income;  value  not  income 4 

To  employees  of  corporation  not  deductible 120 

GOVERNMENTAL  FUNCTION  : 

Income  accruing  to  State  from  exercise  of,  exempt 93 

GOOD  WILL: 

Corporation,  depreciation  of,  not  allowable  deduction 136 

GRATUITIES: 

To  employees  of  corporation  not  deductible 120 

GROSS  INCOME: 
Corporation — 

Definition  of 96 

Engaged  in  more  than  one  class  business,  ascertained  in  accordance 

with  applicable  definition  each  class 112 

General  definition  of  gross  income- v 107 

Manufacturing  company,  definition  of 104 

Mercantile  company,  definition  of 105 

Miscellaneous  corporation,  definition  of 106 

All  sources  to  be  specified p  47 

Definitions 3,4 

Deductions  from — 

By  mutual  marine  insurance  companies,  what 99 

To  ascertain  net  income  for  normal  tax,  paragraph  B 6 

Insurance  company,  definition  of 101 

Life  insurance  company — 

Definition 101 

To  include  applied  surrender  values  and  consideration  for  supple- 
mentary contracts 102 

Of  nonresident  alien,  what  constitutes 8 

What  to  be  excluded  in  computing -  5 

GROSS  VALUE  AT  THE  MINE: 

Defined 6 

Corporation,  definition 142 

GUARDIAN: 

Is  fiduciary,  when 70 

Return  made  by,  when,  regulation :  .p  47, 17 

H. 
HOLIDAY: 

Due  date  of  return  falling  on,  effect  of 176 

HORTICULTURAL  ORGANIZATIONS: 

Exempt p  51 

HUSBAND: 

Assumed  to  have  sufficient  knowledge  of  income  of  wife  to  make  return 

for •..., 10 

Having  net  income  other  than  wife's  income  from  separate  estate  so  that 
aggregate  income  both  more  than  $4,000,  wife  return  attached  to  hus- 
band or  his  income  included  in  her  return  for  purpose  of  $4,000  exemp- 
tion   10 

Should  make  return  of  income  for  self  and  wife 10 

HUSBAND  AND  WIFE: 

Combined  net  income  of,  exceeds  $4,000,  return  of  must  be  made 10 

Both  jointly  and  separately  liable  for  return  and  payment  of  tax 10 


179 


INDEX. 

HUSBAND  AND  WIFE — Continued.    (  Article. 

Not  living  apart,  having  separate  estates,  income  of  both  may  be  made 
on  one  return,  but  return  must  show  income  of  each  separately  stated 

with  name  and  address  of  both 10 

Living  together,  citizen  or  resident  alien,  entitled  to  $4,000  exemption 

from  their  aggregate  net  income 10 

Separated  and  living  permanently  apart,  citizen  or  resident  alien,  each 

entitled  to  $3,000  exemption  from  net  income 10 

HUSBAND  OR  WIFE: 

Either  having  net  income  of  $3,000,  return  required,  and  must  include 

incomes  of  both 10 

IDENTITY: 

Persons  persenting  coupons  or  interest  orders  should  be  required  to 

establish . . 52 

INCOME: 

Additional  tax  on,  referred  to  as  additional  tax p  43 

Amount  from  which  withholding  to  be  had 32 

Banks,  interest  paid  on  deposits  by,  to  be  deducted p  57 

Bonds  or  other  indebtedness p  54 

But  not  value  of  property,  acquired  by  gift,  bequest,  devise  or  descent . .  .p  44 
Compensation  of  officers  and  employees  of  State  or  political  subdivision 

of,  paid  by  United  States,  part  of  gross  income 5 

Corporation — 

Allowance  for  depreciation  by  wear  and  tear p  52 

Amount  allowed  for — 

Depreciation p  52 

Taxes p  53 

Bad  debts  collected  are .' 125 

How  ascertained p  52 

From  sale  of  capital  assets,  how  determined p  52 

Interest  paid  deductible 108 

Losses  sustained  during  the  year p  54 

May  designate  fiscal  year p  52 

Ordinary  expenses  of  operation  deductible 

Penalty  for  failure  to —  p  51 

Make  return  of 

Pay  tax  on  after  June  30 p  51 

To  give  notice  of  fiscal  year  adopted p  55 

Deductions  from  gross,  mutual  marine  insurance  company,  what p  99 

Derived  from  all  sources p.  51,  Art.  14 

Fixed  determinable  annual — 

From  what  derived ^ 63 

Normal  tax  on  bonds,  etc.,  when  deducted .  .p  49 

Withholding  from,  when 64 

Foreign  corporation  doing  business  in  the  United  States,  return  of, 

particulars pp.  51-53-55 

Foreign,  paid  in  United  States,  provisions  for  collection  of  tax  on.  .  .  .54-62 

For  taxable  purposes — is  income  for  calendar  year 4 

For  1913,  how  computed p  54 

From  all  sources  part  of  gross  income 4 

From  bonds,  mortgages,  deeds  of  trust,  and  similar  obligations  of  corpora- 
tions, etc.,  subject  to  withholding  at  source  regardless  of  amount. ...     37 

From  capital  invested  in  the  United  States p  55 

From  certain  professions  not  subject  to  withholding  at  source 32 


180 


INDEX. 

INCOME — Continued.  Article 

From^public  utility  or  governmental  function  accruing  to  State,  etc., 

exempt  from  tax 93 

From  what,  obligations  not  subject  to  tax  and  certificate  of  ownership 

not  required 37 

Gross,  denned 3,4 

Corporation — 

Engaged  in  more  than  one  class  of  business,  ascertained  in 

accordance  with  applicable  definition  for  each  class 112 

Definition  of 96 

General  definition 107 

Insurance  company,  definition  of  gross  income 97,  101 

Life  insurance  company,  to  include  applied  surrender  values  and 

consideration  for  supplementary  contracts 102 

Manufacturing  company,  definition 104 

Mercantile  corporation,  definition 105 

Miscellaneous  corporation,  definition 106 

Mutual  fire  insurance  company,  definition 108 

What  to  be  included  in  computing 5 

Husband  and  wife,  what 10 

Individual,  not  subject  to  withholding  when 32 

Insurance  company,  to  be  separately  stated p  56 

Insurance  reserve,  how  treated p  55 

Interest — 

Accruing  during  year p  55 

On  deposits p  54 

On  obligations  of  State,  etc p     5 

Joint  stock  companies,  how  ascertained  and  stated pp  53-55-56 

Life  insurance  companies, -what  included,  deductions.  .  .    pp  53-56,  art.  100 

Mutual  fire  insurance  companies pp  53-55-56 

What  taxable 98 

Mutual  marine  insurance  companies pp  55-56 

Net- 
Defined 3 

Of  corporation  engaged  in  more  than  one  class  of  business,  how 

ascertained 113 

Deductions  allowed  for  ascertaining p  44 

Shall  include  what pp  43-44-51-53-54-55-56 

Not  subject  to  withholding  at  source,  to  be  covered  in  personal 

return 32 

Note  given  in  payment  of;  maker  of  note  is  debtor  and  source; 

required  to  withhold,  except,  when . .  . .  • 68 

Of  corporations,  verified  how 183 

Returns  of,  filed,  are  public  records;  inspection  of,  who  may  and  for 

what  purpose p  58 

Penalty  for  divulging  information  on  or  exhibiting  returns,  section 

3167 ' p  58 

Tax  paid  at  source,  deducted  in  ascertaining  taxable 3 

On,  from  coupon  or  registered  interest  to  be  deducted  and  withheld, 

except  to  extent  exemption  claimed 44 

Taxable — 

Defined 3 

Persons  subject  to 1 

For  normal  tax,  what,  how  ascertained p  43,  Art.  7 

181 


INDEX. 
INCOME — Continued.  Articile 

Subject  to  additional  tax p  43 

What  not  liable  to  withholding  at  source 32 

Withheld,  what,  when,  by  whom p  48 

INDIVIDUAL: 

Who  may  claim  exemption  paragraph  C 9,  10 

Duty  of,  collection  interest  coupons  originating  in  United  States 39 

Husband  and  wife  living  together,  citizen  or  resident  alien,  exemption 

$4,000 10 

Income  accruing  to,  from  contract  with  State,  etc.,  prior  to  passage  of 
act  of  construction,  operation,  or  maintenance,  public  utility,  taxable     93 

Income  less  than  $20,000  required  to  make  return,  except  when 19 

Income  of,  liable  to  withholding  at  source  on  and  after  November  1,  1913     29 

Liable  for  income  tax  on  share  of  net  earnings  of  partnership 47 

Married  and  not  living  with  husband  or  wife,  amount  exemption 9 

Normal  tax,  what " 1 

Partnership  profits  included  in  return  of  and  tax  paid,  not  reported  as 

income  again 14 

Residing  in  foreign  country,  where  to  file  return '  15 

Return — 

For  calendar  year 4 

Required  of  guardian,  etc.,  notice  of  failure  to  make,  served  when .  .      18 

When  to  be  made 190 

Share  of  earnings,  partnership,  property  of,  subject  to  tax  chargeable  to 

individual *;•••" ^4 

Share  of  partnership  profits  to  be  included  in  personal  return 13 

Single,  allowable  exemption  for 9 

Status  for  claiming  exemption,  determined  as  of  time  of  claim 10 

INFORMATION: 

From  returns  to  officers  of  State,  when,  what,  how 179 

INSANE: 

Who  make  claim  for  deductions  for 33b 

INSPECTION: 

Of  returns,  how 178 

INSURANCE  COMPANY: 

"Deductible  net  addition  to  reserve";  definition;  what  basis  of  com- 
putation of;  what  not  to  be  included  in 147d 

Deduction,  claims  actually  paid  under  policy  contract 147c 

Depreciation  loss  by  shrinkage  in  property  value,  what  and  when 

deductible 147b 

Gross  income,  definition 97,  101 

Income  to  be  stated  separately p  56 

Losses — • 

Actually  sustained pp  53  -56 

Deduction  for  what 147a 

Making  false  return,  penalty p  51 

Mutual  marine,  deduct  what 147d 

Neglecting  to  make  return,  penalty p  51 

Net  addition  to  reserve p  56 

Net  income,  source,  time  of  accrual,  return  of . . . . .pp  12,  14,  20 

Notice  of  assessments  to • p  59 

Penalty  for  failure  to  pay  tax p  60 

Refusing  to  make  return,  penalty p  51 


182 


INDEX. 

INSURANCE  COMPANY — Continued.  Article. 

Reserve — 

Definition '. '. 147d 

Fund,  how  treated ' p  54 

To  meet  losses,  how  treated .  .  147c 

Returns  of,  when  available p  58 

Salvage,  how  treated  in  return  of 147c 

Special  excise  tax,  how  computed,  time,  what p  62 

To  make  return  of  others,  when p  48 

INSURANCE: 
Life- 
Paid  to  beneficiaries  not  to  be  included  in  gross  income,  when  ....       5 
Payment  credited  to  insurance  not  to  be  included  in  gross  income, 

when 5 

Received  by  insured  not  to  be  included  in  gross  income,  when  ....       5 
INTEREST: 

Coupon  or  registered,  originating  or  payable  in  the  United  States,  who  to 

withhold 39 

From  what  obligation  not  subject  to  tax  and  certificates  of  ownership  not 

required 37 

How  treated 63 

On  deposits — 

Part  of  gross  income 4 

Subject  ot  withholding ;  must  be  included  in  personal  return  whether 

paid  or  not 67 

On  obligations  of  State  or  political  subdivision  of,  United  States  or  pos- 
sessions, not  part  of  gross  income 5 

Paid  as  rental  by  corporations,  how  treated 148 

Paid  by  bank,  etc.,  on  deposits,  etc.,  allowable  deduction 149 

Paid  by  corporation — 

Deduction  of  what,  when 148 

On  indebtedness  secured  by  collateral  subject  to  sale,  deductible 

when,  why 150 

At  different  rates,  rule  for  application  of  deduction  of 151 

On  mortgage  on  property  in  which  corporation  has  equity  or  is  pur- 
chasing, how  treated 148 

Part  of  gross  income 4 

Payment  of,  to  beneficiaries  by  insurance  companies,  part  of  gross  income      5 
Registered,  certificate  claiming  exemption  to  be  filed  at  least  five  days 

before  due-date  of  interest 44 

Registered,  duty  of  debtor  before  payment  of 41 

INVENTORS: 

Earnings  of,  indefinite  or  irregular  not  subject  to  withholding 32 

INVENTORY: 

Corporation,  purpose  and  use  of,  kinds  of 161 

JOINT  STOCK  COMPANY: 

Assessment  against,  payable pp  44-57 

Deductions  allowable  to 9 

Income — 

How  ascertained p  52 

To  be  separately  stated p  55 

Losses  actually  sustained p  55 

Neglecting  to  make  return,  penalty p  51 

24785—14 -8 


INDEX. 
JOINT  STOCK  COMPANY — Continued.  Article. 

Net  income  from  all  sources p  52 

Net  income  taxable  for  preceding  calendar  year p  48 

Notice  to  be  given  of  assessments p  57 

Penalty  for  failure — 

To  make  return p  57 

To  pay  tax p  57 

Return — 

False,  penalty  for ' p  48 

For  others  made  by p  48 

Net  income  to  be  shown  on p  57 

Refusing  to  make,  penalty p  48 

When  available p  58 

When  to  make p  55 

Special  excise  tax  and  how  computed p  62 

JUDGES: 

United  States  courts,  salaries  exempt,  what 5 

JURISDICTION: 

Of  courts p  61 

L. 
LABOR  ORGANIZATIONS: 

Exempt p  51 

LAST  DUE  DATE: 

Defined 175 

LAWS: 

Relating  to  assessment,  remission,  collection,  refunding p  60 

LAWYERS: 

Fees,  indefinite  or  irregular,  not  subject  to  withholding 32 

LESSEES  OR  MORTGAGORS: 

Make  return  for  others,  when p  48 

LIABILITY: 

To  tax  of  a  taxable  person  not  to  be  released 27 

LICENSE: 

Bond  may  be  required  on  form  furnished 56 

Failure  to  obtain,  penalty  for 55 

For  branch,  to  be  made  through  principal  office 57 

Form  of  application  for,  to  be  made  to  collector  of  district 55 

Form  of;  to  be  issued  by  collector,  good  until  revoked 55 

Required  for  collection  of  interest  or  other  foreign  items,  when,  by 

whom,  where  obtained p.  50,  art.  54 

LICENSEE: 

First,  receiving  foreign  item  for  collection  to  withhold  and  be  responsible 

for  tax  and  to  note  fact  of  withholding  on  such  item,  effect  of 58 

For  collection  of  foreign  items — 

Disposition  of  certificates  accompanying,  by ,     61 

To  keep  record  showing  what 62 

To  report  to  collector  (Form  1043),  what,  when 59 

LIFE  INSURANCE: 

Proceeds  of  policies,  when  to  be  excluded  from  gross  income. .  ..p.  44,  Art.  5 

LIFE  INSURANCE   COMPANY: 

Applied  surrender  values  and  consideration  for  supplementary  con- 
tracts both  to  be  added  and  deducted  in  return 102 

Deductions  from  gross  income,  what p.  57,  Art.  100 

Gross  income,  definition pp.  52-57,  Art.  101 

Supplementary  statements  attached  to  return  of,  showing  what 103 

184 


INDEX. 
LIMITATION,  STATUTE  OF:  Article. 

For  income  tax  purposes,  thee  years 177 

LODGE  SYSTEM: 

Corporation  operating  under,  defined 89 

Loss: 

Corporation-— 

Deductible,  defined 124 

From  sale  capital  assets,  how  ascertained 128 

From  sale  securities  below  par,  how  treated 135 

Insurance  company,  deduction  for,  what 147a 

Removal  of  building  not  deductible,  why 127 

Reserve  for,  not  deductible 126 

M. 
MAKER: 

Of  note  given  in  payment  of  interest  held  responsible  for  normal  tax.   .     68 
MANUFACTURING  COMPANY  : 

Gross  income,  definition 104 

MANUFACTURERS  : 

Returns  of,  accessible  how,  penalty,  sec.  3167 p  22 

MARINE  INSURANCE  COMPANY: 

Deductions  by p  55 

MATERIALS  AND  SUPPLIES  ON  HAND: 

Deduction  by  corporation  on  account  of,  what 123 

MERCANTILE  CORPORATION: 

Gross  income,  definition 105 

MINE: 

Gross  value  at — 

Defined 6 

Corporation,  definition 142 

Depreciation p  52 

Operated  on  royalty  basis,  corporation,  deduction  for  depletion  of  de- 
posits not  allowed  operating  corporation 145 

MINOR: 

Who  make  claim  for  deductions  for 33b 

MISCELLANEOUS  CORPORATION: 

Gross  income,  definition 106 

MONTHLY  LIST  RETURN: 

Form  of,  what  to  contain,  to  be  filed  in  duplicate 50 

Of  coupon  or  registered  interest  orders  received  with  ownership  certifi- 
cates, form  of  and  what  to  show 53 

Of  licensee  for  collection  of  foreign  item,  form  of,  what  to  show,  with 

whom  filed,  when 59 

Summary  of,  when  to  be  filed  and  what  to  show 50 

Totals  only  to  be  carried  into  annual  return 51 

MORTGAGES: 

Interest  on,  when  subject  to  withholding p  50 

Not  payable  in  United  States,  when  subject  to  withholding..  rp  50 

Paid  by  corporation  which  has  equity,  how  treated 148 

Of  corporation,  income  from,  subject  to  withholding,  regardless  of 

amount 37 

MUTUAL  COMPANIES: 

To  make  return  of  income;  definition  of  net  income 80 


185 


INDEX. 

MUT.UAL   FIRE   INSURANCE   COMPANY:  Article 

Gross  income  of,  definition •  98 

Premium  deposits  returned,  what p  55 

Return  of pp  53-55-56 

Supplementary  statement  attached  to  return  of,  showing  wfrat 103 

Taxable  income,  what 98 

MUTUAL  MARINE  INSURANCE  COMPANY: 

Deductions,  what p  19,  Arts  99,  147d 

Gross  income pp  53-  56 

Supplementary  statement  attached  to  return  of,  showing  what.. .  .    103 

.  N. 
NAMES. 

Arrangement  of,  in  list  by  collector 188 

NATCJRAL  DEPOSITS: 

Deduction  for  depreciation  of,  basis  and  limit  of 141 

NET  INCOME: 

Defined 3 

Corporation — 

Engaged  in  more  than  one  class  of  business,  how  ascertained 113 

For  1913,  how  ascertained 159 

From  sale  of  capital  assets,  how  determined 109 

Should  be  what 158, 183 

Foreign  corporation,  defined 157 

Mutual  companies,  defined 80 

NORMAL  TAX 1 

NOTE: 

Gjven  in  payment  of  income;  maker  is  debtor  or  source  and  must  with- 
|    hold  on  entire  amount  of  note  if  in  excess  of  $3,000,  except  allow- 
ance exemption  or  deduction  claimed 68 

Given  in  payment  of  interest;  failure  of  purchaser  to  make  allowance 

or  deduction  for  tax,  only  remedy  is  against  vendor,  how 68 

NOTICE: 

Answer  of  guardian,  etc.,  may  show  what 18 

Assessment,  advance  preparation  of,  by  collector 198 

Claiming  deduction  account  partnership  expense,  by  whom  filed,  what 

and  how x 47 

Collector  to  give  withholding  agent,  when  tax  withheld  is  ad  juste :  in 

assessment 33c 

Form  1015  filed  by  fiduciary  with  other  withholding  agent,  nothing 

withheld 70 

Of  assessment;  failure  to  pay  tax;  make  return;  form  of;  time 197 

Of  claim  for  exemption  by  foreign  partnership,  when,  what,  how 48 

Of  failure  fiduciary  to  file  return,  served 71 

Of  failure  to  make  return,  when  to  be  served  on  guardian,  etc 18 

To  delinquent,  failure  to  file  return  in  time 196 

To  taxpayer,  of  amount  for  which  liable  as  on  or  before  June  1 25 

O. 
OATH  OB  AFFIRMATION: 

Required  in  verifying  returns 22 

OBLIGATIONS:  » 

Interest  on,  of  State  or  political  subdivision;  United  States  or  posses- 
sions not  paxt  of  gross  income 5 


INDEX. 

OBLIGATIONS  OF  CORPORATIONS,  ETC.:  Article. 

Similar  to  bonds,  mortgages,  and  deeds  of  trust,  income  from,  subject  to 

withholding,  regardless  of  amount 37 

OBSOLESCENCE: 

Of  patents,  deduction  for,  what,  how  determined 138 

OFFICERS: 

Of  State  or  political  subdivision  of,  compensation — 

Of  not  part  of  gross  income 5 

Paid  by  United  States  is  part  of  gross  income. 5 

Regulations  designed  for  enforcing  compliance  with  law p  61 

Of  the  United  States  making  returns  for  others 9 

OlL   OR  GAS   TERRITORY  LEASED: 

Basis  of  deduction  for  depletion  of 7 .   144 

OlL   OR   GAS   WELLS   AND   MINES: 

Operated  on  royalty  basis,  deduction  for  depletion  of  deposits  not  allowed 

operating  corporation 145 

OMITTED  TAX: 

May  be  assessed  and  with  penalty,  when 184 

ORGANIZATIONS: 

Civic,  exemptions p  51 

P. 
PAID-UP  CAPITAL  STOCK: 

Definition  of 95 

PARTNERSHIP: 

As  such  not  subject  to  tax  and  not  required  to  make  return  except  on 

request  Commissioner  or  Secretary 12 

Foreign — 

Composed  of  nonresident  aliens,  resident  aliens,  and  citizens  of 
United  States,  either  or  both,  requisites  of  ownership  certificate    49 

for 

Owning  bonds,  etc.,  of  corporations,  etc.,  organized  or  doing  business 
in  the  United  States  not  subject  to  withholding  on  interest  of 

provided  exemption  claimed  (Form  1016) 48 

Individual  share  of  profits  of,  to  be  included  in  personal  return 11 

Limited,  is  corporation  and  subject  to  corporation  tax 86 

Liable  only  in  individual  capacity p  48 

May  claim  deduction  for  expense  of  business,  when  and  how 14 

Members  of,  liable  in  individual  capacity  for  tax  on  their  respective 

shares  of  earnings  of,  whether  distributed  or  not p  44,  Art  94 

Profits  of— 

Once  returned  and  tax  paid,  not  again  reported  as  income 14 

To  be  included  by  individuals  entitled  to,  in  their  personal  return.     13 

Return  of,  when  to  be  made,  section  3173 p  59 

Shall  forward  correct  statement  of  profits  and  names p  49 

Share  of  profit  to  partners ' p  49 

To  file  with  withholding  agent  notice  claiming  deduction  for  expense  of, 

what  and  how 47 

To  make  list  or  return,  how  and  when,  section  3173 p  59  Art  23 

When  required  to  make  return  must  make  complete  and  correct 12 

PATENTS: 

Deduction  for — 

Depreciation,  what,  and  how  determined 137 

Obsolescence,  what,  how  determined 138 


187 


INDEX. 
PAYMENT:  Article. 

To  officer  authorized  to  receive p  48 

PENALTY : 

And  interest  for  nonpayment  when  due  and  for  10  days  after  notice.whenp  48 
Delinquent  tax — 

Amount  of,  and  how  determined,  not  assessed  against  estates,  in- 
sane, deceased,  or  insolvent  persons 25 

PENALTY: 

For  divulging — 

Information  on  return,  what 181 

Unlawfully,  information  on  return,  fine  or  imprisonment,  or  both, 

with  costs 164 

Failure  to  make  return  in  prescribed  time  or  for  false  or  fraudulent,  fine 

or  imprisonment,  or  both P  58,  Art,  164 

Failure  to  pay  tax,  5  per  cent  tax  plus  1  per  cent  per  month 164 

False  claim  or  statement  to  secure  exemption p  49,  Art.    33a 

False  or  fraudulent  return  with  intent  to  evade  or  defeat  tax,  what. ...     26 

Falss  or  fraudulent  return  100  per  cent  to  tax p  60,  Art.  164 

False  statement  in  regard  to  deduction p  49,  Art.  33b 

Making  false  return p.  51 

Neglect  or  refusal  to  make  return p51,  Art.  164 

Person  or  officer  of  corporation  required  to  make  return,  making  false  or 

fraudulent,  with  intent  to  defeat  or  evade  assessment 164 

Refusal  or  neglect  tomake  return,  liable  person,  corporation,  etc.  p  12,  Art.  26 
Refusal  to  make  or  for  false  return,  to  be  assessed  and  collected,  what. .     21 
Return  made  and  properly  mailed  in  time  but  not  received  in  time,  none  174 
PENSIONS: 

Or  payments  on  account  of  injuries  to  employees  of  corporations,  de- 
ductible expense -. 120 

PERSON: 

Whose  income  is  not  subject  to  withholding  at  source,  make  personal 

return 32 

PERSONS,  FIRMS,  ETC.: 

Collecting  foreign  items,  license  required p  50 

Whatever  capacity  acting,  withholding  agent,  when,  what p  48 

Withholding  none  prior  to  November  1,  1913 p  48 

PHILIPPINE  ISLANDS: 

Exemptions p  51,  Arts.  25,  26 

PLANT: 

Corporation,  deduction  for  depreciation  (in  addition  to  the  deduction  for 

depletion  of  mine),  what  and  basis  of 143 

POLITICAL  SUBDIVISION  OF  STATE: 

Interest  on  obligations  of,  not  part  of  gross  income 5 

Officers  and  employees  of,  compensation  not  part  of  gross  income 5 

PORTO  Rico: 

Exemptions  and  provisions p  51,  Arts.  25,  26 

POSSESSIONS: 

Of  United  States,  interest  on  obligations  of,  not  part  of  gross  income  . .       5 
PREMIUMS: 

Deduction  from,  by  whom,  when p  48 

PRESIDENT  OF  THE  UNITED  STATES: 

Salary  of,  exempt,  what 5 


188 


INDEX. 

PROCEDURE:  Article. 

In  case  of  refusal  or  neglect,  liable  individual  to  make  return  on  or  for 
false  return  made Note  to  Art.  21 

PROFFESSIONAL  : 

Persons  whose  income  indefinite  or  irregular,  not  subject  to  withholding.   32 

PROFIT  OR  LOSS: 

Corporation,  on  sale  of  capital  assets,  how  determined 110 

PROFITS: 

For  taxable  purposes  of  those  arising  or  accruing  within  calendar  year. . .       4 

From  any  source  part  of  gross  income 4 

Partnership  once  return  and  tax  paid,  not  reported  as  income 14 

Partnership,  individual  entitled  to  include  in  his  personal  return 13 

Share  of,  in  partnership  to  be  included  in  return  of  individual 11 

PROPERTY: 

Received  by  gift,  bequest,  devise,  descent,  income  from  but  not  value, 
part  of  gross  income f 4 

PUBLIC  RECORDS: 

Returns  are,  inspection  of  or  copies,  how 178 

PUBLIC  UTILITY: 

Income  from  accruing  to  State,  etc.,  exempt  from  tax 93 

PURCHASER: 

Of  note  given  in  payment  of  interest,  failure  to  make  allowance  or  deduc- 
tion of  tax  in  purchase  or  discount  only  remedy  is  against  vendor.  68 

R. 
RATE: 

Deduction  for  depletion 'Of  mines,  etc.,  regulation  and  limit  of 142 

RECEIPTS: 

Separate  to  be  issued,  when 25 

RECORD : 

To  be  kept  by- 
Collecting  agent,  what 40 

Licensee  for  collection  of  foreign  items,  what  to  show 62 

REFUND: 

Failure  to  make  claim  for  exemption  or  deductions  with  withholding 

agent  in  time;  only  remedy  is  by  application  for 33c 

REGISTERED  INTEREST: 

Certificate  claiming  exemption  from  tax  on,  to  be  filed  at  least  five  days 

Lbefore  due  date  of  interest 44 

REGUATIONS: 

Designed  to  assist  taxpayer  and  officer  in  complying  with  the  law p  61 

Subjects  covered  and  arrangement  of p  61 

REMOVAL  OF  BUILDINGS: 

Not  deductible  loss,  corporation,  why 127 

RENT: 

Corporation,  cost  of  buildings  on  leased  ground  deductible,  when 115 

How  treated 63 

Interest  paid  by  corporation  as,  how  treated 148 

Part  of  gross  income 4 

REPAIRS: 

Deduction,  when 131 


INDEX. 
RESERVE:  Article. 

Assessment  insurance  company, definition 147d 

For  depreciation — 

Diversion  of,  correction 133 

Use  of,  disposition  of  excess  of 132 

For  insurance  of  corporate  property  not  deductible 122 

For  losses  not  deductible 126 

For  taxes  of  corporation  not  deductible 156 

Insurance  company,   deductible  net  addition  to,  definition;  what  basis 

computation;  what  not  to  be  included    in 147d 

To  meet  loss,  insurance  company,  how  treated 147c 

RESIDENT  ALIENS: 

Certificates  of  ownership  of  bonds,  when  and  how  to  be  used  and  to 

specify  what ' 42 

Income  of,  from  coupon  or  registered  interest,  subject  to  withholding 

except  to  extent  of  exemption  claimed 44 

RETURNS: 

Administrators  to  make  for  heirs,  when 9 

Agents  to  make  for  others 9 

Annual  individual  and  monthly  list  to  be  forwarded  to  Commissioner, 

how 24 

Annual  list  (Form  1013),  to  show  what,  and  to  be  filed  on  or  before     50 

March  1 

Annual,  of  coupon  or  registered  interest  orders  not  accompanied  by 
certificates  of  ownership;  form  of,  and  what  to  show;  to  be  filed  when; 

to  show  totals  only  on  monthly  return 53 

Annual,  of  debtors  or  withholding  agents  to  show  totals  only  on  month- 
ly list 51 

Annual,  fiduciary  to  collector  of  district  when;  show  what 71 

Annual,  of  withholding  agent,  form  for.  to  be  accompanied  by  'what, 

when  to  be  filed 35 

Annual,  of  withholding  agent  (Form  1042),  what  to  show  and  when  to  be 

filed 69 

Approval  of  Secretary 7 

Blanks  for,  furnished  corporations  by  collector 163 

By  persons  of  lawful  age 7 

Certified  copies  of,  when,  why,  delivered  to  whom 180 

Conservators  to  make  for  others 9 

Corporation — 

Every,  not  specifically  exempt,  to  make 80 

Fiduciaries,  withholding  agents,  when  to  be  made 190 

Going  into  liquidation  to  make  final;  filed  when  and  where 85 

Not  receiving  blank  for,  should  make  application  for,  to  whom, 

when 136 

One    only  for  1913 160 

Organized  during  year,  to  make 84 

To  make  complete  or  nor  accepted 163 

When  income  paid  by  lessee  direct  to  stockholders,  must  neverthe- 
less make •.  .  .      80 

Copy  of,  unlawful  to  exhibit,  section  3167 P  58 

Divulging — 

Information  from,  penalty 181 

Unlawfully,  information  on,  penalty 164 

Due  date  on  Sunday  or  legal  holiday,  effect  of 176 

Duplicate,  when,  of  whom  required,  disposition  of }. .   193 

190 


INDEX. 
RETURNS — Continued. 

Duty  of  collector —  Article 

On  failure  to  find  person  at  home,  section  3173 p  60 

In  forwarding  and  investigation  of 192 

Employees  to  make  for  others p  49 

Evidence  by  which  to  verify,  what 183 

Executors  to  make  for  others p  48 

Extension  of  time — 

For  filing,  when,  what,  how 23 

To  make,  not  to  exceed  what,  how,  to  whom  made 173 

Failure  of  corporation  to  receive  blank  for,  not  excused  from  making 

return  or  penalties  for  failure 163 

Failure — 

Of  fiduciary  to  file,  notice  of,  served 71 

To  make  by  guardian,  agent,  or  other  person  acting  in  trust  cap- 
acity, notice  to,  served  on 18 

To  make  in  prescribed  time,  of  a  false  or  fraudulent,  penalty 164 

To  make- 
Notice  of,  form  and  time  to  serve 197 

Legal  provisions  as  to p  23 

False  or  fraudulent — 

Penalty p  51,  Art  164 

Duty  of  collector  in  matter  of .....; 192 

With  intent  to  defeat  or  evade  tax,  penalty 26 

Fiduciary — 

Having  income  not  distributed;  what  to  be  shown;  tax  to  be  with- 
held and  paid  when 24 

Must  be  made  when 71 

Not  to  include  income  on  which  tax  paid 71 

To  include  only  matter  within  scope  of  authority 72 

What  to  show,  and  how  executed 73 

For  1913,  must  be  on  new  form  and  not  on  excise  form  heretofore  used  172 
Foreign  corporation  having  more  than  one  branch  office  in  United 

States  to  designated  principal  office  and  person  to  make  return 83 

Form  of  for  corporation  prescribed 163 

For  persons  incapacitated,  by  whom  made p  49 

For  persons  absent  from  United  States,  by  whom  made p  49 

Fraudulent — 

Duty  of  collector p  60 

Extra  tax  because  of p  49 

Time  limitation  for  paying  after  notice 1  .p  49 

_  Husband  and  wife,  net  income  both  exceeds  $4,000,  of  combined  in- 
come, required 10 

Husband  and  wife  not  living  apart,  separate  income  from  separate  es- 
tate may  be  made  on  one;  separately  stated  and  with  names  and  ad- 
dresses of  both 10 

Husband  should  made  for  himself  and  wife 10 

Husband  or  wife,  either  having  net  income  $3,000  or  over,  required, 

and  must  include  income  of  both 10 

Individual — 

To  be  made  when 190 

For  calendar  year .  .• : 4 

Made  by  collector  when 20 


INDEX. 
RETURNS — Continued. 

Individual — Continued.  Article 

Not  required  to  make,  when  made  by  other  for  him,  when 19 

To  include  share  of  partnership  profits  in 13 

Information  or  copies  from,  to  officiers  of  State,  when,  what,  how;  ori^ 

inal  not  removed    except 1 79 

Last  due  date  defined 175 

Leased  corporations  make  their  own 82 

Legality  of,  made  by  collector  of  deputy,  sec.  3176 p  60 

Lessee  corporation  assuming  debts  of  lessor  to  include  in  lessee  return 

all  receipts  of  lessor 81 

Lessee  corporation  not  to  include  in  its  own  statement  of  capital  stock, 

that  of  lessor;  nor  in  its  own  statement  of  indebtedness,  that  of  lessor 

except  when  said  indebtedness  is  assumed  by  lessee 82 

Life  insurance  company — 

Applied  surrender  values  and  consideration  for  supplementary  con- 
tracts both  added  and  deducted 102 

Supplementary  statement  attached  to  return  of,  showing  what. . . .    103 
Made  and  properly  mailed  in  time,  no  penalty  if  not  received  in  time       174 

Made  by  guardian  or  authorized  agent,  when 17 

Made  on  basis  of  fiscal  year  but  not  so  designated,  not  accepted,  and 

must  be  made  for  calendar  year 171 

Made  to  collector p  49 

Monthly,  by  withholding  agent,  when  to  be  filed;  with  whom,  what  to 

accompany 35 

Monthly  list  and  annual,  by  licensee  for  collection  of  foreign  items, 

what,  to  whom,  when 59 

Monthly  list,  form  of,  what  to  contain,  to  be  filed  in  duplicate 50 

Monthly  list  of  coupon  or  interest  orders  not  accompanied  by  certifi- 
cates of  ownership,  form  of,  and  what  to  show 53 

Must  be  made,  when,  section  3173 p  59 

Mutual  companies  to  make;  definition  net  income '.     80 

Mutual  fire  insurance  companies,  supplementary  statement  attached 

to,  showing  what 103 

Mutual  marine  insurance  companies,  supplementary  statement  attached 

to,  showing  what 103 

Neglect  or  refusal  of  liable  person,  corporation,  etc.,  to  make,  penalty..     26 

Neglect  or  refusal  to  make,  50  per  cent  additional  tax 164 

Neglect  to  make,  penalty p  51 

Nonresident  alien,  agent  or  representative  to  make  for,  when,  what  to 

be  included  in 8 

Not  required,  income  not  exceeding  $3,000 p  47 

Not  filed  in  time,  notice  sent  to  delinquent 196 

Officers  and  employees  of  the  United  States,  having  control  salaries, 

rents,  etc.,  to  make  when p  49 

Of  income — 

When  required,  where  filed 15 

•                Persons  deceased  within  taxable  year,  made  by  executor  or  adminis- 
trator      17 

On  basis  of  calendar  year  or  fiscal  year,  time  of  assessment  and  payment 

of  tax 177 

One  deduction  only  of  exemption p  47 

One  to  cover  both  special  excise  and  income  tax  for  1913  for  corporation.?  62 
Open  to  inspection,  when p  68 


192 


INDEX. 

RETURNS — Cont'nued.                                                                                       Article. 
Partnership  profits  included  by  individual  and  tax  paid,  not  again  re- 
ported as  income 14 

Partnership,  requisite  of . . .    12 

Penalty— 

Against  corporation  for  failure  to  make 163 

For  failure  to  make  at  time  specified p  57 

For  refusal  to  make p  51 

Personal,  Form  1040;  fiduciary  may  be  appointed  agent  or  attorney  to 

make  for  beneficiary 72 

Personal  not  required  when 8 

Person  or  officer  of  corporation  required  to  make,  making  false  or  frau- 
dulent with  intent  to  defeat  or  evade;  penalty 164 

Person  residing  in  foreign  country,  provision  for 7 

Public  record-,  inspection  or  copies,  how p.  58  Art.  178 

Receivers  to  make  for  others 9 

Refusal  or  neg'ect  of  liable  individual,  duty  of  collector p.  60  Art.  21 

Refusal  to  make,  extra  tax p  9 

Requisite  of  bookkeeping  for  verifying 182 

State  officer  may  have  access  to p  58 

To  be  filed,  when p  46 

To  be  made  on  Form  1040  for  individuals 16 

To  be  made  to  collector pp.  46-47 

To  include— 

Personal  income  not  subject  to  withholding 32 

Share  of  profits  in  partnership  whether  divided  or  not 11 

To  be  verified,  how,  before  whom pp.  46-59 

Trustees  to  make  for  others p  47 

Understatement  of  income,  cause  to  be  shown  why  amount  not  in- 
creased  p  48 

Undervaluation  or  understatement p  59 

Unlawful  to  exhibit  or  divulge  information  from,  section  3167 p  58 

Wife  having  income  of  $3,000  from  separate  estate  managed  by  herself 

may  make  her  own , 10 

What  must  be  shown  on 16 

When  to  be  made;  where  filed,  section  3173 p  59 

Withholding  agent,  what  disposition  of;  should  not  be  filed  until  expira- 
tion of  time  allowed  for  filing  claims  for  exemption  or  deductions 33c 

REVISED  STATUTES: 

Amended  sections  of,  providing  duties  and  penalties,  sections  3167 

3172,  3173 •  •  •  PP  58-59-60 

ROYALTIES: 

How  treated 63 

ROYALTY  BASIS: 

Mines,  oil  or  gas  wells,  operated  on,  deduction  for  depletion  of  deposits 

not  allowed  operating  corporation 145 

S. 
SALARIES: 

How  treated 4,  63 

J3ALE   OF  CAPITAL  ASSETS.* 

Corporation — 

Income  from,  how  determined 108,  109 

Loss  from,  how  ascertained 128 

Profit  or  loss  on. .  110 


193 


INDEX. 

SALESMEN:                                                                                                           Article. 
Commission  to,  paid  in  stock,  deductible  expense  when 117 

SALVAGE : 

How  treated  in  return  of  insurance  company 147c 

SCIENTIFIC  ASSOCIATION: 

Exemptions p  5 1 

SECURITIES: 

Income  from;  sale  of,  below  par; 'loss 4,135 

SHRINKAGE  : 

In  book  value  capital  assets,  how  treated 134 

In  property  value  insurance  company,  depreciation  loss  by,  what  and 
when  deductible 147b 

SIZE: 

Foreign  items  too  small  for  notation  on,  statement  may  be  attached  to .  .     58 

SOCIETY  : 

Operating  under  the  "lodge  system,"  defined;  exemptions p  51  Art  89 

SOURCE : 

Defined 31 

Example  of  where  and  where  not  withholding  at 32 

Fiduciary  is,  when 70 

Note  given  in  payment  of  income,  maker  of  note  is 68 

Persons,  firms    etc.,  acting  as,  designated  "debtors"  or  "withholding 

agents" 31 

Tax  withheld  at,  to  be  paid  to  collector 34 

Withholding  at,  applies  only  to  normal  tax  imposed  on  individuals  ....     29 
Who  required  to  act  as;  liable  for  tax  withheld 30 

SPECIAL  TAX: 

See  sections  3173,  3176 pp  59-60 

STATE : 

Information  from  return   when,  how 179 

Officers  and  employees,  paid  by  United  States;  compensation  part  of 

gross  income 5 

Political  subdivision  of,   compensation  of  officers  and  employees  not 
part  of  gross  income;  interest  on  obligations  of,  not  part  of  gross  income       5 

STATE  OR  UNITED  STATES: 

Construction;  exemptions,  distinction  as  to,  for  certain  income  from  ' 
State,  etc p pp  51-  58 

STATUS: 

For  claiming  exemption  by  individuals 10 

STATUTE  OF  LIMITATION: 

For  income-tax  purposes,  three  years 177 

STOCK: 

Paid-up  capital,  definition 95 

SUBSTITUTE  CERTIFICATES 40 

SUMMARY  OF  MONTHLY  LIST  RETURN 50 

SUMMONS,  SECTION  3173 p  59 

SUNDAY  OR  LEGAL  HOLIDAY 176 

SUPPLEMENTARY  STATEMENT  ATTACHED  TO  RETURN 103 

SUPPLIES  ON  HAND 123 

T 

TAX: 

Additional,  on  individuals  only,  rates  and  classes 2 

Amounts  added  as  penalty,  section  3176 P  60 

Assessment  and  collection 25 

From  withholding  agent 36 

194 


INDEX 
TAX — Continu     . 

Assessment —  •    Article. 

Against  income  withheld  at  source. ...      38 

Of,  against  withholding  agent  deferred. 189 

Claim  for  abatement  of 33c 

Co-operative  dairies  exempt 92 

Corporation  —  £.*>i 

Exempt 87 

On  entire  net  income 185 

Organized  in  United  States,  all  (with  certain  exceptions)  subject  to     76 

Delinquent  if  not  paid  by  June  30 25 

Deputy  collectors,  duties,  section  3172 p  59 

Domestic  building  and  loan  association,  what  necessary  to  exempt  ....     87 

"Duties"  are  not  but  item  of  cost 155 

Evidence  of  nonliability,  received  by  withholding  agent,  disposition  of .  .p  61 

Evidence  of  payment  of,  by  corporation  for  deduction  purposes 158 

Excise  on  corporation Arts.  160,  191 

Extra p  48 

Failure  to  pay 164,  177,  197 

Fixed  determinate  annual  income,  subject  to  withholding 65,  66 

Fraternal  societie  ,  exempt , p  51 

Individual — 

Net  income  over  $3,000  annually,  liable  to p.  45,  Art.  9 

Income  from  public  utility  taxable  when 93 

Income  of  corporations  organized  elsewhere  than  in  the  United  States 

liability 79 

Normal — 

Computation  of. Art.  1,  7 

Deductions  in  connection  with,    pp.  10-12,  Art.  41 

Agricultural,  horticultural,  an  1  1abor  organizations  certain  mutual 

savings  banks,  exempt p  51 

N-t  to  b^  withheld  against  partnership  profits 47 

Not  to  be  withheld  on  bank  deposits 67 

Omitted,  procedure  upon  discovery  o" 184 

Once  withheld,  subsequent  withhold  in    agent,  exempt  on  filing  certifi- 
cate (Form  1006) 34 

On  excess  of  income  over  exemption 10 

Paid  by  corporation,  when  not  deductible 153 

Partnership  limited  is  corporation  and  subject  to  corporation  tax 86 

Penalty  on  delinquent 2c 

On  income — 

From  bonds,  etc.   corporations,  etc 37 

Paid  by  note 68 

On  interest  on  bonds  owned  by  corporations  organized  in  United  States .     45 

On  net  income  for  foreign  corporation;  definition;  deduction 157 

On  net  income  of  corporation — 

Computation  of 159 

Distributable  to  owners 79 

Receipts  to  be  given  by  coll  ctor p  61 

Returns  of,  to  be  made,  section  3173 p  59 

Special  excise 62 

Taxable  person  not  to  be  relieved  from  liability 27 

To  be  i  aid 177 


195 


INDEX. 
TAX — Continued.  Ar;icle. 

To  be  withheld ' 44,  64 

Withheld— 

At  source,  to  b  >  paid  to 30 

By  first  licensee,  fact  of  withholding  noted 58 

Collector  to  adjust  in  assessment  a  a'nst  wi  hholding  agent 33c 

From  what 64,  75 

To  be  paid  to  collector 33c,  34 

TAXABLE  INCOME: 

Definition;  liability 3,  7 

TAX  DUE 187 

TAXES: 

Paid  by  corporation  constitute  deduction 152 

Reserve  for,  by  corporation  not  deductible 156 

TAXPAYER: 

Regulations  designed  to  assist p  27 

TAX  STATEMENTS 199 

TAX  YEAH  1913 7 

TRUSTEE : 

As  fiduciary 70 

Duties  of p  9 

TEACHER: 

Public  school 5 

TlMBERLAND : 

Deduction  for  deprec  ation — 

Account  removal  of  tinier 159 

Limit  of,  excess  of,  is  income 140 

TIME: 

Extension  of,  for  making  and  filing  return 23,  173 

U. 

UNEARNED  INCREMENT: 

Not  value  for  depreciation  purposes 146 

''UNITED  STATES"  OR  ''STATE": 

Con  traction p  21 

Interest  upon  obligations  of 5 

V. 
VALUE : 

Book,  capital  assets,  shrinkage  in 134 

Gross  at  the  mine,  definition 6,142 

Of  property,  acquired  by  gift,  etc 4,  5 

Shrinkage  in  property,  deductible 147b 

Unearned  increment,  not  as  basis  of  deduction  for  depreciation 146 

W. 

WAGES 4,  63 

WIPE: 

Having  income  of  $3,000  from  separate  estate  managed  by  herself  may 

make  return  of  her  own  income 10 

WIFE  AND  HUSBAND: 

Combined  net  income  of  exceeds  $4,000,  return  required,  both  jointly 

and  separately  liable  for  return  and  tax 10 

WIFE  OR  HUSBAND: 

Either  having  income  $3,000  or  over,  return  required  and  must  include 
incomes  of  both. .  10 


196 


INDEX. 
WITHHOLDING:  Article. 

At  source 30 

Example  of  where  and  where  not 32 

On  and  after  November  1,  1913 29 

By  first  liscensee;  notation  by;  responsibility  of 58 

From  what ~ 64 

WITHHOLDING  AGENT: 
Annual  return  by — 

By,  when,  to  show  what 50,  51 

Of  (Form  1042),  when  to  be  filed,  to  be  accompanied  by  what  ..  35,  69 

Not  to  be  filed  until , 33c 

Assessment  of  tax  against,  deferred  until 189 

Claim  for  exemption  and  deductions  filed  with  Par  B  and  C  p  49  Arts  33ac 

Definition  of,  as  source 31 

Disposition  of  returns  of 193 

Duty  in  matter  of  certificates  of  ownership .' p  49  Art  43 

Duty  of,  in  matter  of  claims  for  deduction  (par  B) 33c 

Duty  of,  in  case  of  foreign  partnership 48 

Evidence  of  nonliability  to  tax  filed  with,  disposition  of p  61 

How  to  treat  substitute  certificate  of  collecting  agent  and  certificates  of 

owners  not  subject  to  having  tax  withheld. 51 

May  file  claim  for  abatement  of  tax '.  .  33c 

Monthly  return  by,  when  to  be  made,  with  whom  filed,  to  be  accom- 
panied by  what 35 

Notice  filed  with,  claim  for  deduction,  account  partnership  expense. ...     47 
Not  to  withhold  against  nonresident  alien  or  foreign  organization  doing 

business  in  United  States,  when 46 

Return  of,  when  to  be  made 190 

Relieved  from  necessity  of  withholding,  when p  61 

To  file  monthly  list  return,  form  of,  and  what  to  contain 50 

To  forward  to  collector  tax  withheld,  when 33c 

To  furnish  statement  of  claim  for  deductions  filed  with  collector 33c 

To  pay  to  collector  tax  withheldv 64 

To  withhold  from,  what,  amount  of 32,  65 

When  claim  for  deductions,  paragraph  B,  to  be  filed  with,  duty  of. .  .33b,  66 
When  so  authorized,  may  file  return  of  withholding  in  district  of  his 

location 38 

Who  to  be,  in  cases  cited .* 64 

WITHHOLDING  AND,  PAYING  AGENT: 

Of  debtor  in  United  States,  charged  with  duty  of  withholding,  when. . .     39 
WITNESSES: 

Jurisdiction  for  compelling  attendance p  60 

Y. 
YEAR: 

For  taxable  purposes  for  individual,  is  calendar  year 4 

(See  fiscal  year  for  corporation.) 


197 


232 10 


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